Ministers at Organization of Petroleum Exporting Countries (OPEC) has recommended deeper output cuts of 500,000 in an attempt to prop up prices and prevent a glut next year.
Although, there was no agreement reached on how the 500,000 will be divided among each member while Friday meeting is expected to be another marathon meeting.
As it stands, OPEC nations have agreed to cut production by 1.2 million barrels per day through March but the group was discussing a further cut of 500,000 barrels a day “in order to safely go through the seasonal demand trough in the first quarter 2020,” Russian Energy Minister Alexander Novak, had said early Friday morning.
The countries that make up the OPEC oil-producing cartel talked into Friday morning where deep cuts to production have been proposed, a solution to support the price of fuel around the world.
Although Its an agreement in principle and details and final distribution will need to be discussed later today.
Market implications
Markets were hoping for a news conference but an OPEC spokesman recently told waiting journalists that it would not take place and that a written statement might come later.
For the meanwhile, the price of Brent crude is steady at around $63.47, awaiting further confirmations. However, the question is whether this is enough of a cut, considering that we have more oil coming to market from non-OPEC nations, such as from North America, Brazil, Norway and Guyana.
At face value, the news that OPEC had agreed to an additional 500,000 of cuts was arguably a much better outcome for markets than was expected.
A report by a Norway based independent energy research and business Intelligence Company Rystad Energy estimated the global oil market is on track to be oversupplied by 800,000 barrels of oil per day in the first half of 2020. So that’s the amount by which OPEC+ must deepen its cuts, Rystad said.
However, in reality, the fact that the cuts have yet to be ratified by OPEC allies, the allocation of quotas yet to be decided and that cuts rely on 100percent current compliance are still major issues that are yet to be addressed.
