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What will be OPEC+ major challenge in 2020?

Oil&Gas Materials 23 December 2019 10:44 (UTC +04:00)
What will be OPEC+ major challenge in 2020?

BAKU, Azerbaijan, Dec. 23

By Leman Zeynalova – Trend:

The challenge for OPEC + in 2020 is not to drive prices up too high as to stimulate more production from non-OPEC countries, Edward C. Chow, Senior Associate, Energy and National Security Program, Center for Strategic and International Studies, told Trend.

Meanwhile, the expert said he regards OPEC+ as mainly fictional. “Production cuts are borne largely by Saudi Arabia and very few others in reality.”

He noted that OPEC has been fairly successful in keeping oil prices above $60 for most of 2019.

“The challenge as always is not to drive prices up too high as to stimulate more production from non-OPEC countries, particularly American shale oil, and investments in exploration and development of new discoveries that generate longer-term supply outside of OPEC,” said Chow.

He believes that the risk in 2020 and beyond is that additional supply may coincide with decline in growth of the global economy, a natural correction after a long period of economic recovery since the global financial crisis, triggered by trade disputes or other factors.

“Pushing prices up too high leads to new supply and lower demand and, therefore, prices ARE dropping later. This has been true throughout the history of petroleum industry. It is difficult to maintain high prices and a stable market. This is now compounded by global concerns over climate change and policies to reduce greenhouse gas emissions and promote renewable energy sources,” said the expert.

The 7th OPEC and non-OPEC Ministerial Meeting, held in December this year, decided for an additional adjustment of 500 tb/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 Declaration of Cooperation.

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Follow the author on Twitter: @Lyaman_Zeyn

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