Opec’s top official said that the outlook for the oil market in 2020 has brightened as economic growth holds up, signalling that pressure on the group to deepen its production cuts may have eased.
“The picture is looking brighter,” secretary-general Mohammad Barkindo told reporters in Vienna. “At the moment, 2020 has an upside potential that may actually surprise the market.”
The Organisation of Petroleum Exporting Countries and its partners, who cut crude production this year as fragile demand and booming US supplies threatened to unleash a glut, will meet early next month to consider their strategy for the year ahead.
With the group’s forecasts showing potential for a renewed surplus next year, amid growing signs of a global recession, speculation had built that the Opec+ coalition would need to slash output further. Last month, Barkindo said producers were willing to do “whatever it takes” to prevent another market slump.
Opec nations face pressure to boost oil prices, which at just above $60 a barrel in London remain too low for most members to cover government spending. However, cutting their production deeper would require them to sacrifice even more sales volumes, and could backfire by encouraging further investment in rival supplies such as US shale oil.
It’s also unclear whether Opec’s principal ally, Russia, would be willing to extend its output restraints as it faces less budgetary pressure to maintain elevated oil prices.
The secretary-general’s comments yesterday, made at the presentation of Opec’s annual World Oil Outlook report, suggest that any urgency for more vigorous action may be abating.
It’s too early to say whether the market actually will be oversupplied in 2020, as the organisation has to complete a number of studies before ministers convene in Vienna on December 5-6, Barkindo said.
There are more “optimistic” signals on the trade dispute between the US and China, which had been weighing on the 2020 outlook for demand, Barkindo added.
World markets are already on track for stability because of the efforts of the 24 Opec+ nations, Barkindo said, adding that countries which haven’t yet delivered on their agreed cutbacks are in the process of “ramping up” their compliance. Opec and its partners pledged to reduce output by 1.2mn barrels a day at the start of 2019, though the actual drop has been far more extreme because of unplanned losses in Venezuela and Iran.
Nonetheless, the long-term forecasts presented by the organisation yesterday show that it confronts a few difficult years: demand for the group’s oil will slump by 7% between now and 2023 as the US shale boom continues.
from Gulf Times https://ift.tt/2Ni7z4Y
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