OPEC foresees a second semester full of uncertainty in the oil market

OPEC foresees a second semester full of uncertainty in the oil market

By Energía16

12/06/2018

Recent developments have led the OPEC to foresee a second semester full of uncertainty in the oil market, as the organization stated in its monthly report published today, June 12.

The cartel acknowledges the uncertainty surrounding oil, in spite of assuring that the global supply glut has been reduced. This achievement is attributed to the production cut measure that the OPEC has been implementing since January 2017.

The Organization of Petroleum Exporting Countries states that until May, crude prices have been consistently 30 percent higher compared with 2017. By that moment, Brent was trading at over $70 for the first time since 2014.

The uncertainty highlighted by the OPEC “suggests that at the next meeting there will be no rush to lift the production cut measures.” the report says.

Additionally, it also stresses that the OPEC, Russia, and other outside producers decided to adopt said measures as a means to eliminate oversupply. The main scope of this pact was to reduce oil stocks in developed nations to the five-year average. In this regard, the established goal of cutting production by 1.8 million bpd was surpassed.

In the report, the OPEC indicated that in April stocks in these nations declined to 26 million barrels under the five-year average. This figure stands out when compared with the 340 million barrels above the average recorded in January 2017.

Uncertainty in the oil market to be discussed in upcoming meeting

After the barrel hit $80 (2014-highs), Russia and Saudi Arabia are analyzing whether to increase production. Producers are set to meet on June 22-23 in Vienna to set a policy, the agency reported.

However, the OPEC also indicated that it remained cautious regarding the market’s scenario for the rest of 2018. “Crude futures have lost some momentum amid uncertainty. Meanwhile, traders prepare for potentially more supply returning to the market.”

“While oil demand in the US, China, and India shows some upside potential, downside risks might limit this potential going forward,” the report added.

The text showed that OPEC members kept production below the agreed limit. Even when production surged in May and despite the fact that Saudi Arabia increased its supply.

OPEC production rose by 35,000 barrels per day to 31.87 million bpd, the group stated. For its part, Saudi Arabia announced that its output is back at over 10 million bpd.

Another topic that will probably be discussed at this meeting will be the position eventually adopted by the OPEC with regards to the U.S. sanctions on Venezuela. They will also discuss possible future sanctions on Iran. Nevertheless, information indicates that there is little interest in discussing this topic.

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