ОПЕК+ Рынок ожидает соглашения по ограничению добычи
ОПЕК+

OPEC + Market expects continuation of agreement to limit production

On July 1, 2019, a meeting of OPEC + and non-cartel countries will take place. The main issue of this meeting will be the timing of the extension of the agreement on the volume of oil production. The issue is significant for the oil market and is aimed at growth the cost of oil in the framework of widespread growth and lower demand.

Earlier, OPEC members and non-cartel countries made a deal between the parties (OPEC +) to limit oil production in order to stabilize and increase the oil cost. This agreement has already been extended at the beginning of the year. And this event actually made the oil prices to grow from January to May 2019.


Oil quotes chart (BRENT brand – Japanese candlesticks, WTI brand – blue line)

 

The oil market and most analysts expect OPEC + the extension of a deal to restrict production until the end of this year. This is highly expected and can be called logical. The deadline for a very convenient and meets the existing approach of OPEC. Also, no one bothers in early 2020 to hold a second meeting of OPEC + with the question of extending the restrictions.

The question of the volume of the restriction remains more significant and how these restrictions will be distributed among the participants. We will not talk about the existing risks on the oil market; you can read about it here: “The oil market and its cloudy prospects”.

The issue of production quotas within the group of OPEC + countries remains one of the most acute, as representatives of oil production of almost all OPEC + countries are dissatisfied with existing quotas. Quotas not only deprive them of profits, but also limit their market. Against this background, OPEC + will adhere to existing quotas less closely even as part of their extension. Therefore, members of OPEC + should not expect over-fulfillment of restrictions on limiting oil production, as it was in 2017.

As a result, it is likely that this will reduce the significance of the OPEC + agreement on limiting oil production for the oil market in the future. Already, many large oil exporters are increasing oil production in pursuit of sales markets. This can be explained by the average price of oil at $ 60 per barrel, which is more than acceptable for many OPEC + participants.

In fact, the existing policy of OPEC and non-cartel countries is aimed at fixing the average price of oil in the price range of $ 50-70 per barrel.


Anton Hanzenko

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