[ad_1]
At what appeared to be one of the least hectic meetings in recent years, OPEC and its allies canceled this week's reduction in production in March 2020, saying the oil market was still oversupplied and that Demand growth seemed weaker at least for the remainder of 2019.
OPEC's mission to reduce surplus stocks, if successful, would result in higher oil prices, which cartel members need to balance their budgets, most of which depend excessively on oil exports.
However, rising oil prices are inadvertently helping American shale production continue to grow, offsetting much of the barrels that OPEC is holding in the market.
It seems that the agreement is now targeting a rise in oil prices and will consider taking back its market share later.
At present, OPEC and its non-OPEC-based partners based in Russia as part of a reduction in production focus on reducing inventories and increasing price, even if it meant giving up market share and making sure that OPEC's share of world oil production fell for the first time for less than 30%. 1991, according to Bloomberg News estimates.
But OPEC's "free pbad" for American shale will not last long, according to JP Morgan. In the medium term, the cartel and its de facto leader, Saudi Arabia, will recover market share in the United States, CNM's Christyan Malek, head of oil and gas research for JP's EMEA region, told CNBC Morgan.
Related: Putin: Oil price volatility hurts Russia's economy
The Saudis and OPEC aim to "support the oil while they are actually pregnant with all that economic growth and capital that they have to provide. That said, what we say to bulls is, do not get used to it, "Malek told CNBC's Squawk Box Europe.
The cartel is now "two feet in the camp of value" that seeks to raise oil prices, but the "acceptable" price level of oil is falling, said Malek.
"The bar continues to fall, it's just very gradual. In a few years, I expect the price of oil to reach $ 50, which could allow Saudi and OPEC to recover this share of the market, which will become more competitive. " , told CNBC the leader of JP Morgan.
"I have no doubt about the fact that American shale will peak, plateau and then decline like all other basins in history," said Saudi Minister of Energy, Khalid al-Falih, in Vienna this week, as reported by Bloomberg.
OPEC may have to wait at least a decade or a decade for American shale to peak, with many estimates of a peak at around 2025 or later.
But waiting for the shale peak to be imminent is not viable for OPEC. The longer the wait, the more difficult it will be to reclaim a share of the world oil market.
Although OPEC's immediate objective is clear, badysts question whether these cuts could be sustainable over the long term and what is the purpose of the deal.
The OPEC and its allies "have no other purpose than to postpone the inevitable moment when the age of abundance of resources can no longer be delayed," CNBC told CNBC Ed Morse, Global Head of Commodity Research at Citi. Related: Why natural gas prices collapsed
The cuts represent a "largely defensive" measure, as the main factors weighing on the producers of the OPEC + countries are now their vulnerability to low oil prices and their insufficient income, said Mr. Walrus.
The extension of the OPEC + cuts must be seen as constructive, said Warren Patterson, head of commodity strategy at ING, who expects a rise in oil prices. 39, here the rest of the year.
Still, the market was unimpressed by the postponement of the cuts, the least we can say: oil prices reacted in the worst way for years to an OPEC meeting, recording a fall by more than 4%, with concerns over demand continuing to outweigh any bullish sentiment.
"There is also the question of the sustainability of these long-term cuts, given that US producers will be delighted to fill the void left by the OPEC + cuts," said Patterson of ING .
The lower the price of oil that OPEC manages to withdraw from the market as a result of the cuts, the more the American shales – encouraged by price increases – will offset these reductions.
The ultimate goal of OPEC may not be clear, but its current goal of rebalancing the market (and supporting prices) will give way to rival producers, especially American shales.
By Tsvetana Paraskova for Oilprice.com
More from Reading Oilprice.com:
[ad_2]
Source link
