Ashley Kelty, Oil & Gas Research Analyst at Cantor Fitzgerald Europe, has provided their thoughts on the OPEC+ cuts.
“The supposed cut of 1.2 million bpd by OPEC+ is larger than some had expected, although still some way of what is really required to bring the market back into balance.
“However, the real issue is the details of the baseline point from which the new quotas are set, given the Saudis increased production significantly last month. If it is on current production levels, then the net impact for the Saudis is in reality negligible relative to what they were producing before prices slipped from US$80 highs. Consequently, it is hard to say what the long term impact will be. Our initial snap judgement is that prices will stabilise in the US$60 - 65/bbl range, as the cuts are likely to be insufficient to stem the near term supply glut, given US output is continuing to rise (albeit at a slower pace due to capacity constraints).
“It feels like a bit of a fudge, and the absence of the final communique at this late stage suggests that a lot of horse trading has been underway to reach a situation that tries to appeal to all parties, whilst ending up with a situation that will appease no-one.”
Read the article online at: https://www.oilfieldtechnology.com/special-reports/10122018/cantor-fitzgerald-europe-opec-production-cut-feels-like-a-bit-of-a-fudge/