Opec Production Cut Agreement 2018

Falih said a decision by Opec and its allies in May to extend the restrictions until March 2018 had already further balanced global oil supply and global demand. OPEC`s decision on production levels is essential as it helps determine the extent of oversupply in 2019. The other factor is the growth in demand and the risk of an economic slowdown that would weaken the outlook for oil demand. Currently, Wood Mackenzie expects oil demand to increase by 1.1 million barrels per day by 1.1 million barrels per day in 2019. Olivier Jakob, an analyst at Petromatrix, said that while the result was largely as expected, the meeting showed that countries were beginning to consider an exit strategy for production cuts. OPEC also decided to limit total production in Nigeria and Libya to less than 2.8 million bpd in 2017. Both countries are exempt from reductions due to unrest and below-average production. The alternative to such an agreement would be further price cuts. To some extent, this result is already being taken into account, with some believing that President Donald Trump`s pressure on lower oil prices could prevent an OPEC deal. However, oversupply would be sufficient to cause further price declines from current levels. The deal injected more oil in July, increased global shipments in the third month and cast doubt on OPEC`s commitment to cut production. But the IEA sector group hopes that growing demand will catch up.

(11.08.2017) “This would help producers cope with the strength of U.S. supply growth in 2019 if we expect non-OPEC production to increase by .b 2.4 million from the previous year, as U.S. supply continues to grow strongly. Russia, which for the first time this year cut production sharply with OPEC, insisted that there be a clear message on how to end budget cuts so that the market does not run into deficit too soon, prices do not rise too fast and the United States does not compete. In two days of difficult negotiations, the Saudis insisted that all OPEC members participate in the cuts. In the end, the group granted waivers to Iran, whose production is declining due to sanctions from Washington, as well as Venezuela and Libya, whose production has been hampered by political and economic turmoil and civil wars. The group wants to agree on a reduction in production, but insists on some issues that have not yet been resolved, including the volume to be reduced; the inclusion in the agreement of the two exempt OPEC producers (Libya and Nigeria); Russia`s participation and the date of its reduction; and the duration of the agreement on limiting production. As in December 2016, when the current agreement was drafted, Russia says it will take several months to reach its reduced production level. In our forecast, Russia is expected to produce 11.3 million .b/d by the second quarter of 2019, compared to 11.4 million bd. Russia`s energy minister has called for greater discipline among major oil exporters in reducing production. The goal – higher crude oil prices – is at the heart of the Kremlin with the 2018 elections.