Why are OPEC and its allies returning to reduce oil production?
Date: Wednesday, November 7,
PARIS (Reuters) – The largest oil producers can return to the possibility of reducing production in order to support market prices, while the fear of shrinking supply against US sanctions and expectations of record production in the US have been freed.
A major source of bricks said on Wednesday that the return of the OPEC-led alliance and OPEC-led producers led by Russia can not be ruled out in order to reduce oil production in 2019 in order to avoid potential supply gaps that could cause pressure on prices.
The source said that Russia and Saudi Arabia began bilateral talks on possible reductions in oil production in 2019.
The agency has quoted an unnamed source that Saudi Arabia has launched a study on the possibility of reducing production in the coming year.
OPEC and its allies – including Russia – decided in June to ease the production restrictions that have been in place since 2017 following pressure from US President Donald Trump to lower oil prices and compensate for the deficit in Iran.
On Sunday in Abu Dhabi, the ministerial committee of OPEC members and allies will meet to discuss the market situation and the prospects for 2019.
The current interim agreement, which began in early 2017, ends in December.
Oil prices, currently floating around 72 dollars for Brent crude oil, fell from the highest level in 2018, which last month reached $ 86 a barrel.
Another delegate from the Organization of the Petroleum Exporting Countries (OPEC) who answered the question whether the talks show that production reserves will be reduced in 2019: "Certainly not the other way round."
Oil prices have fallen under pressure from rising stocks, despite expectations of lower Iranian exports due to new US sanctions.
The expectations of surplus supply and a slowdown in demand in 2019 also have a negative impact on the market.
Data and Outlook
Nigerian Oil Minister Emmanuel Epe Cachico said on Tuesday that OPEC needs data on the impact of new US sanctions on Iran, and added that its production may not be reversing the sharp decline that some have predicted.
|Expectations of surplus stocks and slower demand in 2019 have a negative impact on the market (Reuters)|
Bloomberg's forecast for crude oil will fall fastest since 2014, as fear of drop in stocks fell due to temporary exemptions for eight sanctions on Iranian oil imports and expectations of higher production in the US.
The US government expects oil production to grow at a record high this year, as industrial data show that stocks in the US rose last week.
At the same time, the exemptions granted by the United States to the G8 would allow Iran to continue to export its oil to the largest party for six months.
The agency underlined that the fear of the fall in stocks, which increased crude oil prices to four years in a month, was reduced as a result of speculation that the United States would facilitate sanctions to reduce Oil prices at home.
In the US, government estimates show that this year's biggest annual growth in domestic raw production will be.
According to the US Energy Information Administration, average production will reach 10.9 million barrels a day this year, compared with 9.35 million in 2017, the largest increase ever.
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