Production cuts agreed by OPEC and its allies are on track to balance global oil markets in the first half of 2019, but more work may be needed after that.
If Saudi Arabia, Russia and other countries in the so-called OPEC+ coalition cut production by 1.2 MMbpd as promised for the first six months of next year, world supply and demand will be in equilibrium. However, booming U.S. shale supplies mean they would need to almost double the cutback to prevent a new surplus in the fourth quarter, a report from the group showed.
Oil prices remain stuck in a bear market, trading just above $60/bbl in London, even though OPEC and its partners surprised traders with the size of the supply reduction announced on Dec. 7. Traders remain concerned that record American oil production and shaky fuel consumption could foment a new glut.
OPEC in its report, which is released each month by the group’s research department in Vienna indicates that world markets could tip into oversupply again during the second half of 2019. Even if they restrict supplies to the level agreed last week, there would still be a surplus of about 1 MMbpd in the fourth quarter.
Source: World Oil