Against the backdrop of the growing threat to crude oil demand growth and rising production from the United States, the Organisation of Petroleum Exporting Countries needs to take action sooner than later to support oil prices at least around $60 a barrel Brent, IHS Markit said on Thursday.
IHS Markit, a global information provider, said in a new report that Saudi Arabia, OPEC’s largest producer and de facto leader, was still determined to support oil prices, even if its production would have to be further cut.
It noted that the country’s energy minister recently expressed the kingdom’s plans to convince the cartel’s other members and their allies into a deeper production cut during the next OPEC+ meetings to be held in December.
The IHS Markit analysts said, “Reduced Saudi production output has remained since the end of 2018, a strategy followed by Russia and most OPEC members such as the United Arab Emirates. Their effort hasn’t been as successful as they wished, even if Iranian exports have collapsed, together with a sharp decline in Venezuelan output observed. Brent moved below $60 per barrel last week.
“The market’s sentiment is heavily affected by the escalating tension between Washington and Beijing, with fears that the trade war between the world’s two biggest economies will disturb global economy’s performance and as a result demand for oil as well. Meanwhile, as increasing risks threaten demand growth, supply is set to further expand, as the US shale production keeps on rising, with a surplus to be developed next year.”
According to the report, OPEC would have to reduce production by around one million barrels per day for prices to be supported close to $60 per barrel for long.
IHS Markit said Middle Eastern crude oil lifting fell sharply in July, with overall volumes down by more than 800,000 bpd.
“However, volumes have stabilised in August so far, with current volumes standing only marginally below last month’s totals, close to 16.50 million bpd. It has been primarily Saudi Arabia’s loading that has been declining, while Iranian exports remain below 100,000bpd.