The decision of the OPEC + countries to adhere to the previously established terms of the deal to reduce production will stabilize the market and strengthen oil prices at $ 62-68 per barrel… This is the opinion of the experts interviewed by Izvestia. The decision was announced on April 27 during a meeting of the ministerial monitoring committee of the alliance. At the beginning of the month, the OPEC + countries agreed on a gradual increase in production – 350 thousand barrels each in May and June and another 440 thousand in July. Cartel members must adhere to such agreements in full to ensure the stability of the world market, said Russian Deputy Prime Minister Alexander Novak. The main factors affecting the market will be the success in the fight against coronavirus in the world and the balance of supply and demand for energy, experts say.
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Renewal of the decision
The OPEC + Ministerial Monitoring Committee on April 27 recommended leaving the earlier decisions on oil production unchanged… On April 1, the countries of the cartel agreed to gradually increase the production of black gold, Izvestia wrote. Production should be increased by 1.14 million barrels per day in three months: 350 thousand in May and June and another 440 thousand in July. At the same time, Saudi Arabia is gradually weakening its voluntary cut by 1 million barrels per day.
The next OPEC + ministerial meeting is scheduled for June 1st. On it the cartel will consider the situation in terms of production levels for August, as well as in general until the end of the year, said on the air of the TV channel “Russia 24” Russian Deputy Prime Minister Alexander Novak.
– We reviewed the market situation and once again confirmed the decisions that were made a month ago. <...> This will provide an opportunity to reach the production levels that were planned in 2021, taking into account the growth in demand and the gradual recovery of the market, – he said.
Alexander Novak noted that the OPEC + countries should monitor the situation in the global oil market amid the ongoing spread of coronavirus. According to him, there is now a positive trend in the indicators of population mobility and a recovery in demand in the largest oil-consuming states.
But for OPEC +, information about the record increase in the incidence of coronavirus in India, the largest market in the Asia-Pacific region, has become significant, said Artem Deev, head of the analytical department at AMarkets. In the country, the number of cases in recent days has consistently exceeded 300 thousand people.
Market stabilization
On the eve of the meeting, the monitoring committee of the OPEC + deal in its report raised its forecast for oil shortages on the market this year by half.… According to the new forecast, demand will exceed supply by 1.2 million barrels per day, not 0.8 million.The Committee also improved the forecast for the growth of world average daily oil demand, it should grow by 6 million barrels per day to 96.5 million barrels … In addition, the OPEC + countries extended the deadline for those who have not yet sufficiently reduced oil production. The laggards were given time to compensate for the overproduction under the deal until September.
“The recommendations of the ministerial monitoring committee on maintaining the current production quotas were predictable,” said Natalya Milchakova, deputy head of the IAC Alpari. – Now OPEC + is in a situation where it cannot make any decisions on changing production quotas in any direction without worsening the situation either on the market or for individual members of the alliance.
In anticipation of OPEC decisions + oil quotes showed moderate growth… On April 26 at 15:30 Moscow time, July Brent futures traded at $ 64.20 per barrel. On April 27 at 15:30 Moscow time, black gold rose in price to $ 65.52 per barrel. BUT after the announcement of the OPEC + decision, by 17:00 Moscow time, quotes remained at about the same level – $ 65.47. This is evidenced by the trading data of the London stock exchange ICE.
– Oil quotes are likely to remain at the same level – in the corridor of $ 64.5-67 per barrel… They will be influenced by the epidemiological situation in the world and the negotiations between the United States and Iran on returning to the agreements within the framework of the 2015 Tehran nuclear deal, ”said Andrey Maslov, analyst at Finam Group.
If the United States lifts the embargo on Iran, it will significantly increase the supply of oil products on the market and negatively affect quotations, Natalya Milchakova agrees. While the price for Brent should be expected in the range of $ 63-68 per barrel in the next month, she said.
At the same time, the main issue for the market remains the balance of supply and demand., noted Artem Deev. Everything will depend on how quickly countries can return to their previous volumes of oil consumption, which is difficult to predict in the context of the ongoing pandemic, the expert concluded. In his opinion, prices are likely to remain in the range of $ 62-66 per barrel in the near future.
Alexander Novak also spoke about the same range.
– We see that prices on the market today are more or less stable – they fluctuate around $ 62-66 per barrel. We hope that such a stable situation will remain until the end of the year, ”he said.
According to Alexander Novak, Russia will continue to closely monitor the situation on the world oil market to ensure a balance of supply and demand.