OPEC continues balanced market commitment
Alan Bailey Petroleum News
Following a May 19 meeting of the ministerial committee overseeing OPEC’s oil production agreement, the committee reaffirmed its commitment to maintaining a balanced oil market, with sustainable market stability. Partners to a December 2016 agreement on production cuts have been adapting to changes in market conditions, the committee said, commenting that the organization reported high levels of conformity with voluntary oil production adjustments. However, there are significant uncertainties regarding future market dynamics, with continuing trade negotiations, monetary policy developments and geopolitical challenges, the organization cautioned.
Between early March and late April the Brent crude price increased from around $64 per barrel to more than $74. The May oil market report published by the International Energy Agency attributed this rise to the end of U.S. waivers on Iranian oil exports. Since the end of April the price has dropped a bit, hovering around the $70 level. The price of Alaska North Slope crude tends to correlate with the Brent price.
The IEA has slightly lowered its expectation for oil demand growth in 2019, as a consequence of a lower rate of demand growth in Africa and Asia. However, countries in the developing world, in particular China and India, will continue to drive global oil demand growth, potentially adding 1.1 million barrels to daily demand.
On the other hand, the global oil supply fell by 300,000 barrels per day in April, primarily because of production drops in Canada, Kazakhstan, Azerbaijan and Iran. OPEC production rose by 60,000 barrels per day - Saudi Arabia held about 70% of OPEC’s spare production capacity, the IEA said.
Growth in oil refining throughput continues to be “lackluster” but is expected to pick up between May and August, the IEA said. Oil stocks in countries of the developed world dropped by more than an average amount in March, the agency said.
In a May 19 report on the oil market situation, Bloomberg commented that much of the current risk in the oil market lies on the supply side, with disruption continuing in Venezuela and Libya. Decisions by Saudi Arabia over what to do with its spare production capacity may determine market trends in the coming months, Bloomberg suggested.
- ALAN BAILEY
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