Baku, Azerbaijan, Dec.5
By Leman Zeynalova – Trend:
OPEC is expected to cut the crude production moderately in order to prevent a large oversupply in 2019, Trend reported citing Wood Mackenzie research and consulting company.
“We forecast total global supply in 2019 will increase by 1.7 million barrels per day year-on-year. This forecast takes into account moderate production restraint from OPEC and Russia. We see oil demand rising 1 million barrels per day year-on-year in 2019. This means there will be an implied stock build next year, even with production restraint of about 0.8 million barrels per day,” Ann-Louise Hittle, Vice President, Oils Research at Wood Mackenzie said.
Wood Mackenzie said it would expect the cut to stabilize prices and prevent further declines. “If it is a clear commitment to cut 1 million barrels per day, then we would expect prices to rise several dollars a barrel.”
OPEC's decision on production levels is key because it helps determine the scale of oversupply during 2019, according to Hittle.
“The other factor is the rate of demand growth and the risk of an economic slowdown, which would weaken the oil demand outlook. Currently Wood Mackenzie is forecasting a year-on-year increase for 2019 of 1.1 million barrels per day in oil demand.”
The company believes that OPEC’s main challenge is twofold: to reach agreement on the size of the cut and then to divide reduction among its members.
“This is more difficult to achieve than releasing a statement saying all OPEC members agree to 100 percent compliance to the December 2016 agreement. Saudi Arabia would like to see other producing nations adhere to production cuts so it does not carry the burden alone. Libya and Nigeria are currently exempt from production restraint and their status needs to be considered. Iraq will be another tricky issue since it is seeing production growth and capacity gains,” said the company.
The 175th Meeting of the OPEC Conference will be held in Vienna, Austria on December 6, 2018.
OPEC and non-OPEC producers reached an agreement in December 2016 to curtail oil output jointly and ease a global glut after more than two years of low prices. OPEC agreed to slash the output by 1.2 million barrels per day from January 1.
Non-OPEC oil producers such as Azerbaijan, Bahrain, Brunei, Equatorial Guinea, Kazakhstan, Malaysia, Mexico, Oman, Russia, Sudan, and South Sudan agreed to reduce output by 558,000 barrels per day starting from January 1, 2017.
OPEC and its partners decided to extend its production cuts till the end of 2018 in Vienna on November 30, as the oil cartel and its allies step up their attempt to end a three-year supply glut that has savaged crude prices and the global energy industry.
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