US dominance in the oil markets will only grow, says the IEA
Last week, major oil producers in Austria met to cut oil production by 1.2 million barrels per day (bpd). OPEC producers and non-OPEC oil producing countries, including Russia, agreed on Friday to make the cut, which will be done in the first half of 2019.
OPEC agreed to reduce production by 800,000 bpd while Russia and allied manufacturers, 10 manufacturers in total) will contribute a reduction of 400,000 bpd. OPEC member Iran received an exception for the cuts because it is subject to US sanctions that are already detrimental to the oil industry.
The agreement was aimed at laying a floor under recently volatile oil prices. Oil markets have stabilized this week, hoping that the cuts will support prices, as well as data showing a decline in US stocks.
"The time will tell how effective the new production agreement will be in balancing the oil market. The next meeting of the Vienna Agreement countries will take place in April and we hope that the intervening period is less volatile than it was recently" said the IEA.
On Thursday, Brent traded rough futures at $ 60.36 per barrel and US West Texas Intermediate at $ 51[ads1].26. The IEA maintained its previous global oil demand growth forecast in its latest monthly report and forecasts growth of 1.4 million barrels per day, "as the effect of lower prices is compensated by lower economic growth assumptions, weakening currencies and downgrades to some countries, such as Venezuela . "
Despite the agreement, the OPEC meeting in Vienna, Austria last week made strong divisions between manufacturers with a little more reluctant to cut than others. The cut also came after Saudi Arabia, the de facto leader of OPEC, and Russia, had increased production in the summer.
Prior to the OPEC and the non-OPEC agreement last week, the IEA noted that OPEC production had increased 100,000 barrels per month a month to 33.03 million barrels per day in November, as Saudi Arabia and United Arab Emirates has reached record height, counteracting a sharp loss from Iran.
By accepting a cut of 1.2 mb / d and further production constraints in Canada, manufacturers can go a little in the direction of restoring the balance to the world market, "said the IEA. The forecast for non-OPEC growth in 2019 growth has been reduced by 415,000 bps since last month's report to 1.5 mb / d, compared with 2.4 mb / d growth expected in 2018.
