Three countries to bear brunt of proposed OPEC cuts
Baku, Azerbaijan, Dec.12
By Leman Zeynalova – Trend:
Saudi Arabia, the United Arab Emirates (UAE) and Kuwait will have to bear the brunt of the proposed OPEC cuts, Trend reports citing the UK-based Capital Economics consulting company.
To recap, on Dec.7, OPEC and its allies announced a 1.2 million bpd cut in oil production (from October production levels) for six months starting in January.
“Of course, full compliance is not guaranteed. Russia has already stated that it will reduce production by 60,000 barrels in January, whereas it is meant to be cutting by 200,000-250,000 in total. Meanwhile, OPEC did not set individual country output targets and it seems likely that Saudi Arabia, and to a lesser extent the UAE and Kuwait, will have to bear the brunt of the proposed 0.8 million barrels cut,” said the report released by the consulting company.
The company analysts recall that for its part, Saudi Arabia said it would reduce production to 10.2 million barrels in January, 0.5 million less than its October output.
“However, even if full compliance is not achieved, we estimate that the market will still be close to balance. Underpinning this forecast is our expectation that we will see lower growth in oil demand in 2019 in a number of major consumers,” said the report.
Nonetheless, Capital Economics said there are risks to its forecast of lower prices.
“Possibly the biggest risk is that President Trump does not renew the waivers on Iran sanctions given to eight of the country’s largest export markets. For now, his priority appears to be keeping oil prices low, but any change of heart would lead us to revise up our price forecast. What’s more, there are other supply risks, including further steep declines in Venezuela’s output and disruption to shipments from Libya and Nigeria,” said the report.
The company expects a combination of slower global GDP growth and persistent rises in US shale output to lead to lower oil prices in 2019. “Our end-2019 forecast for Brent is now $55 per barrel ($60 previously).”
The 5th OPEC and non-OPEC Ministerial Meeting was held in Vienna, Austria, on December 7, 2018.
The meeting participants decided to adjust the overall production by 1.2 million barrels per day, effective as of January 2019 for an initial period of six months. The contributions from OPEC and the voluntary contributions from non-OPEC participating countries of the ‘Declaration of Cooperation’ will correspond to 0.8 million barrels per day (2.5 percent), and 0.4 million barrels per day (2 percent), respectively.
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