BAKU, Azerbaijan, Dec.9
By Leman Zeynalova – Trend:
OPEC’s deeper oil output cuts will not cause a dramatic decline in supplies, Trend reports citing Capital Economics, UK-based research and consulting company.
The 7th OPEC and non-OPEC Ministerial Meeting, held in Vienna, Austria, on Dec.6, decided for an additional adjustment of 500,000 b/d to the adjustment levels as agreed at the 175th Meeting of the OPEC Conference and 5th OPEC and non-OPEC Ministerial Meeting. These would lead to total adjustments of 1.7 mb/d. In addition, several participating countries, mainly Saudi Arabia, will continue their additional voluntary contributions, leading to adjustments of more than 2.1 mb. This additional adjustment would be effective as of 1 January 2020 and is subject to full conformity by every country participating in the DoC.
“The announcement that OPEC+ will deepen output cuts by 0.5m bpd in the first quarter of 2020 boosted oil prices this week. While the decision means that the market will be a bit tighter next year than we had anticipated, we think the drop in supply won’t be as dramatic as the headline suggests,” said the company.
This is because many members are likely to continue to produce above quota, according to Capital Economics.
As such, unless the company sees improvements in compliance, it is sticking with the forecast for the price of Brent to rise to $70 per barrel by end-2020.
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.
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