The decision last week by OPEC+ to cut oil production in an attempt to stabilize prices is not likely to push Brent crude prices above $80 a barrel any time soon, Emirates NBD noted in its latest report on Sunday.
“The OPEC+ cuts are unlikely to spark a major turnaround in prices or allow them to push back up to above $80 a barrel in Brent in the near term,” Edward Bell, Emirates NBD’s commodity analyst wrote.
Last Friday, OPEC+ and Russia agreed take 1.2 million barrels per day (mbd) off the markets from January 2019. OPEC members will provide 0.8 mbd of the cuts while non-OPEC countries (Russia, Kazakhstan, Sudan and Mexico among others) will cut by 0.4 mbd.
The cuts, the report added, will be in place for the first six months of the year and will largely bring output in line with our own projections for the UAE and Saudi Arabia.
“The scale of the cuts will help limit the increase in inventories expected for 2019 but isn’t enough to push the market back into deficit. We project a market surplus of around 1.2 mbd in Q1 with the new production levels (compared with an original projection of 1.5 mbd),” the report added.
However, it said, by agreeing to relatively vague terms OPEC+ looks to be counting on further supply disruptions to hit markets over the next few months.
“Production from OPEC members will display a much more flexible profile going forward, responding to near term market conditions. Hence we wouldn’t rule out OPEC unwinding or deepening these cuts at their next meeting in April if market conditions warrant it,” the report added.
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