BAKU, Azerbaijan, Dec.4
By Leman Zeynalova – Trend:
OPEC+ needs to rollover through to the end of 2020. But with global supply growth outpacing demand in 2020, we’ll need further cuts if demand growth disappoints again, said Ann-Louise Hittle, Vice President Macro Oils, Wood Mackenzie.
“OPEC will have to move promptly, in this case, and take out additional production if it wants to support price,” said the expert, Trend reports citing Wood Mackenzie.
As for production, Ann-Louise Hittle said a lot of OPEC oil is off the market – volumes are 2.5 million b/d below a year ago.
“Around half of that is involuntary, due to US sanctions on Venezuelan and Iranian exports. The other 1.2 million b/d are deliberate cuts by OPEC+. Admirable adherence by key producers in the OPEC+ group has been instrumental in balancing the market and holding Brent above $60 this year. Without cuts, prices would be much lower,” she said.
The expert said given the uncertainty around global supply growth, demand and geopolitics, OPEC will do well to get an outcome like 2019. Brent will average $64 in 2019, down on last year’s $71, but still the second-highest annual price since 2014.
“It’s a measure of OPEC’s success so far in balancing what is a fundamentally an oversupplied market.”
In late 2018, OPEC and a number of countries outside this organization (OPEC+ format) decided to modernize the terms of the agreement on the reduction of oil production, in force from the beginning of 2017. The countries agreed to reduce the total production by 1.2 million barrels per day from the level of October 2018.
On July 2, 2019, a decision was made in Vienna to extend the agreement on reducing oil production by OPEC member and non-member states until the end of the first quarter of 2020.
The 177th Meeting of the OPEC Conference is expected to be held December 5, 2019, followed by the 7th OPEC and non-OPEC Ministerial Meeting on December 6 in Vienna, Austria.
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