OPEC+ is expected to adjust their oil output in line with demand
BAKU, Azerbaijan, Dec. 26
By Leman Zeynalova – Trend:
OPEC+ is expected to adjust their oil output in line with demand, Trend reports citing Japanese MUFG bank.
“Next year, the global economy is forecast to grow at the same, gradual pace it has done this year. Furthermore, judging by the current trajectory of the semiconductor and automobile sectors, the manufacturing industry – which had been soft – is starting to rebound from an adjustment. As a result, demand for oil is expected to grow at the same pace as this year,” reads a report released by the bank.
MUFG bank said that on the other hand, the question of whether or not the increase in supply can keep in pace with the rise in demand depends on the success of OPEC and non-OPEC member countries’ continued oil production cuts and the deceleration of growth in US shale oil output.
“OPEC+ will aim for equilibrium between oil supply and demand going forwards, and is expected to adjust their oil output in line with demand,” reads the report.
Furthermore, as the bank said West Texas Intermediate (WTI) prices are below $60 at present, which is roughly the break-even price of US shale oil production, and there is a continued fall in the number of working rigs. “Taking this into consideration, the pace of shale oil production is expected to slow in the future and it appears the increase in oil supply in 2020 will fall below this year’s by quite some way.”
Based on the above, oil supply and demand will continue to move in equilibrium on the whole, according to the bank.
“Looking ahead, oil prices are forecast to average $57 per barrel in 2019 and
$58 per barrels in 2020: remaining within the $55 to $59 per barrel range. That being said, it is necessary to keep an eye on large movements in the fluctuation of oil prices caused by political and geopolitical risks via speculation about the future of demand and supply. Risks include the direction of US-China trade negotiations.”
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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