The OPEC+ crude oil production reduction agreement, which has been implemented for nearly three years, is not only expected to be further extended, but also to increase production cuts.
The market once again focuses its attention on Vienna. On December 5, OPEC held its 177th plenary meeting at its headquarters in Vienna. On December 6, the 7th OPEC and non-OPEC oil-producing countries represented by Russia (i.e., OPEC+ meeting) will be held to finalize the ministerial meeting. meeting decision.
On the evening of December 5, Beijing time, the oil ministers of the OPEC member countries came to the meeting one after another, which meant that the two-day production reduction discussion meeting officially kicked off.
As the meeting approached, officials from oil-producing countries successively released information, various market expectations emerged, and international oil prices rose accordingly.
As of press time on December 5, WTI crude oil futures rose slightly by 0.1% to US$58.49 per barrel, and Brent crude oil futures rose by 0.51% to US$63.32 per barrel.
There is a high probability of reaching a new production reduction agreement
Iraq is OPEC’s second largest oil producer Thamer Ghadhban, the country’s oil minister, recently publicly stated that judging from the market performance in the past period, OPEC+’s current production reduction of 1.2 million barrels per day is not enough. He suggested that an additional 400,000 barrels per day should be cut on this basis. , that is, 1.6 million barrels per day.
“I think the probability of extending the production reduction agreement again is quite high. The situation in Iraq has been unstable recently, and Saudi Arabia’s voice in Iraq has been increasing recently, and Saudi Arabia has always advocated production reduction. “, and the Iraqi official’s recent statements also support Saudi Arabia.” Wang Xinjie, chief investment strategist of Standard Chartered Bank’s China Wealth Management Department, told reporters.
Previously, after reaching a production reduction agreement in 2016, OPEC oil-producing countries and non-OPEC oil-producing countries represented by Russia (OPEC+) began to implement the production reduction agreement in early 2017. Since then, the agreement has been adjusted and extended several times. In early July this year, OPEC+ extended the production reduction agreement again, extending the agreement to reduce production by 1.2 million barrels per day until the end of March 2020.
As the “big brother” of OPEC, Saudi Arabia has been leading the production reduction issue because higher oil prices can support fiscal revenue. In addition, in view of the upcoming listing of Saudi Arabian Oil Company (Saudi Aramco), the country There is more incentive to stabilize oil prices.
In addition, Oman officially released news that it will propose extending the production reduction agreement until the end of 2020.
A report released by Platts Energy on December 5 stated that OPEC’s actual implementation of production cuts has exceeded its promised quota. Overall, in November, OPEC’s overall production was 29.65 million barrels per day. , among which the output of the 11 participating countries in the production reduction agreement accounted for 25.66 million barrels per day, a decrease of 1.18 million barrels per day compared with their October production, which means that the actual production reduction compliance rate reached 145%. Platts Energy pointed out that it appears that the OPEC+ proposal initiated by the Iraqi Oil Minister to reduce production by an additional 400,000 barrels per day is actually being implemented, as long as OPEC maintains the current level.
Platts pointed out that not all members agreed to further production cuts, and more people preferred to extend the duration of the current agreement. As far as Saudi Arabia is concerned, its production in November was 9.9 million barrels per day, which was 430,000 barrels per day less than the production reduction quota it assumed. Saudi Arabia has sufficient motivation to stabilize oil prices because its state-owned Saudi Aramco shares will start trading next week. The transaction will be official. Saudi Arabia has put pressure on Iraq and Nigeria, which have the worst compliance rates among players.
“I think the two-day meeting will eventually reach a new production reduction agreement, which is expected to be further extended to the end of next year.” Wang Xinjie said.
Oil prices are expected to fluctuate within a narrow range next year
Although production cuts will help stabilize oil prices, oil producers such as Saudi Arabia China has still paid a certain price, and the price is to give up its share to the United States, and the global crude oil supply pattern has changed.
Iraqi Oil Minister Thamer Ghadhban also recently stated that OPEC is no longer the world’s largest crude oil supplier, currently accounting for only 30%, and the United States has become the world’s largest oil producer.
“Every move” in the U.S. crude oil market affects the price trend.
The U.S. Energy Information Administration (EIA) released data on December 4, local time, saying that U.S. crude oil inventories fell by 4.9 million barrels in the week ending November 29, ending the previous five consecutive weeks of increases. . The decline was far larger than expected as refineries ramped up production. Analysts had expected inventories to fall by 1.7 million barrels.
Affected by this news, U.S. WTI crude oil futures once rose by more than 4%.
OPEC is obviously aware of this reality. In early November, OPEC released its latest annual report, stating that the organization’s global market in the next five years is expected to be squeezed by the United States and others. In the past two years, in order to boost oil prices, OPEC has signed a production reduction agreement with oil-producing countries represented by Russia, and has extended the production reduction agreement many times and has implemented it to this day. At the same time, the output of other oil-producing countries represented by the United States continues to grow. The report also mentioned that the U.S. sanctions on Iran and Venezuela, members of the organization, have also had an impact on crude oil supply. In comparison, “non-oil producers” The supply outlook of OPEC oil-producing countries has been significantly raised, especially production in the United States.”
OPEC also expects its market share to be further squeezed. By 2024, the group’s output is expected to drop to 32.8 million barrels per day, from 35 million barrels per day in 2019.
The market currently predicts that the crude oil production of non-OPEC countries such as the United States, Brazil and Norway may increase next year.This exacerbates the overall oversupply situation.
“If a new production reduction agreement is reached, oil prices should receive better support. We expect the price range of oil prices to be US$65-75 per barrel. In the future, on the demand side, The uncertainty next year will be less than this year, and the overall macro will tend to be stable; the key is still on the supply side. It is expected to be similar to this year. The United States will increase production and OPEC will reduce production, forming a dynamic balance situation. It is expected that oil prices will form a narrow range. Fluctuating trend.” Wang Xinjie said. </p
