Short-Term Market Rebalance to 'Proceed Smoothly', If OPEC Adheres to Cuts

Short-Term Market Rebalance to 'Proceed Smoothly', If OPEC Adheres to Cuts
If OPEC continues to adhere to the output cut deal then the short-term market rebalancing process is expected to proceed relatively smoothly over the coming months, McKinsey Energy Insights says.

If OPEC continues to adhere to the output cut deal then the short-term market rebalancing process is expected to proceed relatively smoothly over the coming months, according to a new report from McKinsey Energy Insights (MEI).

The Global Oil Supply and Demand Outlook report, which identified five potential supply and demand scenarios, outlines that oil prices will revolve around $60 to $70 per barrel over the next three years and balance close to $65 to $75 per barrel by 2030 - if the market was to follow MEI’s ‘business as usual scenario’.

MEI has identified six key supply and demand drivers that will contribute to long-term oil price recovery. On the demand side, slower growth in global GDP—2.5–2.7 percent per year—coupled with decreasing oil intensity, due to improved energy efficiency and alternative fuels, will drive a structural deceleration in oil demand growth.

On the supply side, the level of decline in legacy production, the cost of new production, and LTO and OPEC production will all affect the supply stack, the report highlighted. 



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