December 4, 2019 / 5:03 PM / 9 days ago

ANALYST VIEW-Extend, trim, deepen or dump: OPEC+ to decide on oil pact

    Dec 4 (Reuters) - OPEC and other oil producers led by Russia
must decide to extend, trim, deepen or dump their pact on
curbing output which is set to expire in March 2020.
    OPEC members meet on Thursday in Vienna to discuss the
matter followed by a meeting with Russia and others, a grouping
known as OPEC+, on Friday.             
    The current deal calls for an output reduction of 1.2
million barrels per day (bpd), about 1.2% of global demand, to
support the market.
    Here are some themes and scenarios analysts are watching out
for:
    
   EXTENSION
** "We believe the global oil supply-demand balance requires an
extension of the current OPEC+ cuts given (1) the large increase
in production from legacy non-OPEC projects currently taking
place and (2) the still uncertain demand growth outlook."
-Goldman Sachs (Dec 2)

**  Expect OPEC+ to extend current cuts from end Q1 2020 to end
Q2 2020, and "sharpen focus on compliance among the laggards."
-DNB Markets (Dec 4)

** OPEC will need to extend and deepen cuts to support oil price
in the near-term - the U.S. will lead a list of non-OPEC
countries that will see the quickest production growth in 2020,
followed closely by Norway and Brazil. -Rystad Energy (Dec 4)

** OPEC could extend supply cuts through 2020 rather than three
to six months currently factored in by markets - if OPEC
maintains current curbs, global oil inventories could build in
first half of 2020. -BNP Paribas (Dec 3)
     
   DEEPER CUTS 
** A deeper cut will be more of a paper exercise than a real
production cut, "formalising the already lower Saudi production
level and exempting Russian condensate production from the
production quotas." A deeper cut would lead to an oil price
increase of $1-3 a barrel whereas a rollover of existing cuts
could push prices down $0-2 per barrel. -DNB Markets (Dec 4)

** Rumours of deeper production cuts persist, while "non-OPEC
heavyweight Russia is reportedly indicating stronger compliance
willingness." -JBC Energy (Dec 4)

** Deeper output cuts are unlikely "not least because of poor
compliance with current cuts." -Capital Economics (Dec 3)
      
   COMPLIANCE
** With several participating countries still not meeting their
commitments, Saudi may not want to guarantee market balance on
its own, delaying an extension to secure greater compliance
first." -Goldman Sachs (Dec 2)
 
** "Full observance of supply cuts by all participants is
necessary to attenuate the builds in the first half of 2020 and
hope for some draws in the second half of the year with a
changing economic and fundamental outlook." -BNP Paribas (Dec 3)
    
   MARKET SHARE LOSS CONCERNS
** "There appears little appetite among the countries of the
OPEC+ producer group to cede further market share and deepen
existing pledged output curtailments." -BNP Paribas (Dec 3)

** "The record high production growth from non-OPEC tight oil
and offshore puts significant pressure on OPEC's ability to
balance the oil market in 2020," Espen Erlingsen, head of
upstream research, Rystad Energy said. -Rystad Energy (Dec 4)

 (Reporting by Shreyansi Singh and Arpan Varghese in Bengaluru;
editing by Jason Neely)
  
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