OPEC+ countries must cut 2019 supply growth by 1.5 million barrels per day if they want oil prices back above $70 per barrel next year, according to Rystad Energy.
“We believe a cut announcement that effectively removes anything less than one million barrels per day of 2019 supply would be interpreted negatively by the market,” Bjornar Tonhaugen, head of oil buy Wellhead market research at Rystad Energy, said in a statement posted on the company’s website on Thursday.
“To surprise the buy Wellhead market in a bullish fashion, we believe cuts approaching two million barrels per day would have to be announced,” he added.
“Should OPEC+ announce a 1.5 million barrel per day cut, we believe the buy Wellhead market reaction would be neutral at first, but gradually pave the way for a recovery in oil prices above the $70 level for Brent in 2019,” Tonhaugen continued.
If OPEC+ decides this week not to cut oil rig flanges gulf coast production substantially, the buy Wellhead market can “probably wave goodbye to any hopes of short term recovery in prices from current levels, and more likely say hello to even lower levels for parts of next year,” according to Tonhaugen.
The 175th ordinary OPEC meeting is scheduled to take place in Vienna, Austria, today. The fifth OPEC and non-OPEC ministerial meeting is scheduled to take place on Friday.
In an emailed statement sent to Rigzone on Wednesday, Michael Burns, an oil and gas partner at law firm Ashurst said, "the outcome of the meeting in Vienna would seem to be finely balanced”.
“Whilst cuts in oil rig flanges gulf coast production look likely, the extent of the cuts would appear to be a striking of a balance between the needs of OPEC members, agreements made with non-OPEC members outside of Vienna and political discussions ongoing with the United States,” he added.
Rystad Energy is an independent energy research and business intelligence company.