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What will dictate OPEC decision regarding oil cuts?

Oil&Gas Materials 10 April 2019 12:20 (UTC +04:00)

Baku, Azerbaijan, April 10

By Leman Zeynalova – Trend:

Brent crude is expected to average $73 per barrel in 2019, rising to $80/bbl and $82 /bbl, respectively, in 2020 and 2021, Trend reports citing Fitch Solutions Macro Research (a unit of Fitch Group).

“The market fundamentals have grown increasingly supportive, led by cutbacks on the supply side. But lingering concerns over the health of the global economy continue to drag on both sentiment and prices. Our forecast assumes an average of $76.2/bbl for the rest of the year, which is strongly bullish compared to spot. We believe that fundamental shifts in the balance of supply and demand have yet to be reflected in Brent and that broader market sentiment is overly bearish. Nevertheless, the balance of risk to our forecast lies to the downside,” said the company.

Further, the report says that supply has tightened substantially over Q119.

“In large part, this reflects continued attempts by the OPEC+ group to manage the market and prices. Our core view is that the OPEC+ group will opt to rollover over the deal in its current form into H219, to buoy prices and revenue. However, there are some signs of tension within the group, with reports surfacing that Russia is under internal pressure to ease the constraints on its production,” said Fitch Solutions.

The company said that Russia has a significantly lower fiscal breakeven that many of the core OPEC members, it has a number of projects due online.

“Ultimately, the decision by OPEC+ will be dictated by the price trajectory and state of the market in June. One key decider will be the US’ position towards sanctions on Iran. Venezuela is another potential wildcard for Brent. Shifts in Venezuelan production have had little impact on sentiment, but are significantly impacting fundamentals, in particular for heavy crudes,” said Fitch Solutions.

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Follow the author on Twitter: @Lyaman_Zeyn

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