OPEC stays the course with production deal

OPEC and Russia agreed at the latest meeting of the producers’ group in Vienna to extend oil production cuts beyond March 2018 and through 2019 in a bid to keep 1.8mn b/d off the market. Crude prices have risen nearly 20% since OPEC’s last meeting in May 2017. Continued supply cuts will help clear a global supply overhang.

Commenting after the announcement, Ann-Louise Hittle, Vice President, Macro Oils, Wood Mackenzie, said: ‘The stakes were high for OPEC. Despite the success in cutting output and follow-on price recovery, if the agreement had ended in March 2018, our forecast shows there would have been a very large 2.4mn b/d year-on-year increase in total world oil supply for 2018. That would have led to a persistent oversupply for every quarter of 2018.’

She continued: ‘A mid-2018 review could be warranted due to several uncertainties that could shift the fundamentals for 2018. These include political risk to oil supply, level of recovery from Libya and Nigeria, and rate of growth in US oil production during 2018. Another is world oil demand growth. If it is stronger than expected, it would cause the oversupply we expect in 1H2018 to shrink. Our forecast is based on oil demand growth of 1.2mn b/d in 2017 and 1.4mn b/d in 2018; but a colder than expected winter, for example, could lift 1Q2018 demand higher than projected and tighten the market.’