Speaking as the OPEC and OPEC+ meetings ended in Vienna today, Ann-Louise Hittle, vice president, Macro Oils, at global natural resources consultancy Wood Mackenzie, said: “The agreement to roll over production restraint was a foregone conclusion after the green light from Russia’s president, Vladimir Putin, at the G20 meeting for continued production restraint.
“Putin met with Saudi Arabia’s Crown Prince Mohammed bin Salman at the G20 and announced Russia will continue to cooperate with Saudi Arabia and OPEC to manage the market.
“The agreement was carefully organised. OPEC made its announcement on 1 July, with the broader OPEC+ group confirming continued production restraint today. Output curbs will remain in place through 2019 and into the first quarter of 2020, under the current terms.
“In addition, a non-restricting charter was issued declaring continued cooperation between OPEC and any willing non-OPEC producers to manage the market in the best interest of producers, consumers and investors.”
Price impact
Ms Hittle added: “The impact on oil prices has been limited, with prices rising slightly on 1 July. They dipped today, but rose again on rumours of a potential US attack on Iran. As the US stand-off with Iran continues, so will speculation. This will have a varying effect on oil prices, depending on how tightly balanced the market is at the time.
“Wood Mackenzie expects continued production restraint at current levels through 2020 to offset the impact of strong non-OPEC supply growth. For 2019, this results in a tight balance between supply and demand in the remainder of 2019 because of the impact of US oil sanctions on Iran and Venezuela.
“We forecast Brent to average $68 per barrel for 2019 as a whole, and $69.50/b in the second half of 2019.”
Ms Hittle said: “The agreement will help balance the market as 2020 starts. This will allow OPEC+ to decide whether to continue production restraint for the rest of the year, or to adjust quotas. The next ordinary meeting on 5 December 2019 allows the group a chance to reassess 2020 fundamentals.”
Source: Wood Mackenzie