Baku, Azerbaijan, Sep.6
By Leman Zeynalova – Trend:
Although survey data is signalling a month-on-month rise in OPEC oil output for August, the effective cut still looks set to be in the range of 1.3-1.4 million barrels per day (b/d), Trend reports with reference to Fitch Solutions Macro Research (a unit of Fitch Group).
“On the supply side, OPEC and Russia continue to manage the markets, under the production cut deal. The deal is in place through Q120 and will likely be rolled over, should oil prices stay weak,” reads a report released by Fitch Solutions.
The company analysts pointed out that meanwhile exports from Venezuela and Iran (which are both exempted from the OPEC deal) are at critically low levels.
“Their access to markets will remain severely inhibited over H219 and 2020, with little scope for a rollback of the US sanctions currently in place,” the Fitch Group company believes.
Meanwhile, US shale production growth has continued to tumble, the report shows.
“The US Energy Information Administration reported growth for July of 18.2 percent y-o-y. As point of comparison, in July 20 18 growth stood at 28.9 percent.
Pipeline capacity expansions from Q4 19 could alleviate some pressures on production heading into 2020, but weak oil prices, tighter financial conditions and intensifying pressure from E&P shareholders will combine to cap the gains,” said Fitch Solutions.
Taken together, and in the context of chronically weak production growth outside of OPEC and the US, this points to some tightness on the supply side, according to the company.
At the end of 2018, OPEC and a number of non-affiliated countries (OPEC+) decided to extend the agreement on reducing oil production, which has been in force since the beginning of 2017. The countries agreed to reduce their production by a total of 1.2 million barrels per day from the level of October 2018.
A decision was passed in Vienna on July 2, 2019, regarding the extension of the agreement on the reduction of oil production by the countries of OPEC and non-members of the cartel until the end of the first quarter of 2020.
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