At the forefront of OPEC and non-OPEC meeting in Vienna on 22 June 2018, industry experts have forecasted that the oil-producing countries may abandon their historic supply pact in the second half of 2018 and raise oil output to meet global demand
According to a Gulf Intelligence industry survey, conducted with 66 oil industry executives, market traders and analysts, 46 of the respondents said that the world’s biggest oil exporters will raise output in the third and fourth quarter of 2018.
The low oil prices finally propelled the world’s biggest oil exporters, led by Russia and Saudi Arabia, into a year of shuttle diplomacy that saw 24 countries signing on to the supply cut agreement in December 2016, to remove 1.8 mmbbl a day from the market. According to the industry experts, both the countries are reportedly ready to increase their oil output, with new streamlined oil and gas projects in both Middle East and Africa.
“OPEC's policy will more than likely change come 22 June, 18 months of hard graft and quite frankly, astounding compliance by all members has done its job and flat price is up at the dizzying heights of US$76 per barrel,” said Dubai-based Matt Stanley, fuel oil broker, Freight Investor Service.
OPEC and its allies have accomplished their mission of reducing global oil stocks to desired levels, the International Energy Agency (IEA) reported in April 2018, signalling that the market could become too tight if supply remains restrained.
OPEC has spent the past few years attempting to push up the price of oil following its collapse in 2014 when the price plunged from more than US$115 a barrel to hit a low below US$30 a barrel in early 2016. This was mainly due to increase in supply from Russia, Venezuela and other OPEC nations that were desperate for cash. In addition to this, the new arrival of fracking firms in the US led to pumping huge quantities of oil and gas, thus impelling more price fall.
However, 31 per cent of those polled in the Gulf Intelligence GIQ survey said that they think it is too early to abandon this historic agreement and expect OPEC to keep the supply agreement in place until the end of 2018, as formally agreed at the last OPEC meeting in December.
In this context, it remains to be seen how this developing situation will affect prices in the medium- to long-term.
