BAKU, Azerbaijan, March 5
By Leman Zeynalova - Trend:
The latest decision of OPEC+ to extend and further deepen the oil cuts is a good decision, but its success hinges on compliance, Ann-Louise Hittle, vice president, Macro Oils at Wood Mackenzie said, Trend reports.
“Compliance itself probably won't be full, but moderate adherence should be enough to stabilize the market through the second quarter,” she said.
Hittle pointed out that if the demand loss which is now being experienced continues into the second quarter, the group may need to revisit the cuts and reassess them.
“In our current projection, world oil demand is expected to fall 2.7 million b/d in the first quarter. This is a massive drop, and it shows the scale of the problem OPEC+ faces. China’s demand alone is expected to fall by 2.3 million b/d in the first quarter.The drop in global demand is the most severe the market has seen since the fourth quarter of 2008, at the height of the global economic crisis,” said the analyst.
Hittle went on to add that whether Russia will agree to the cuts is the million-dollar question. “Russia hasn’t signed on yet and as the leader of the non-OPEC group, their agreement is key. Given their history of co-operation with OPEC, we expect to see some support.”
Wood Mackenzie’s base case view assumes that leading OPEC Middle East producers - Saudi Arabia, Kuwait and the UAE - make further moderate production cuts in the second quarter of the year, in reaction to weakening demand.
The 178th (Extraordinary) Meeting of the Conference of the OPEC decided to recommend to the 8th OPEC and non-OPEC Ministerial Meeting to extend the adjustment levels agreed at the 177th Meeting of the Conference and the 7th OPEC and non-OPEC Ministerial Meeting for the remainder of the year. It also agreed to recommend to the 8th OPEC and non-OPEC Ministerial Meeting a further adjustment of 1.5 mb/d until 30 June 2020 to be applied pro-rata between OPEC (1.0 mb/d) and non-OPEC producing countries (0.5 mb/d) participating in the Declaration of Cooperation.
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