The OPEC, non-OPEC production cut deal will hold in its current form until December 2018, but the risk of compliance slippage has materially increased with U.S. President Trump's decision to withdraw from the Iranian nuclear accord.
That is the view of oil and gas analysts at BMI Research, who said that the US’ decision to end all nuclear-related sanctions waivers for Iran would smooth the re-entry of cut OPEC, non-OPEC barrels to market in 2019.
“Crucially, it will allow OPEC and Russia to shift their narratives on production from restraint to growth, without derailing the global recovery in oil prices. Key producers can frame increases in their output as a response to any (perceived) gap in the market created by the barrels lost from Iran,” the analysts said in a brief report sent to Rigzone.
BMI said it was unclear how far Iranian exports would be impacted by the withdrawal but said its current forecast is for a 500,000 barrel per day (bpd) year on year decline in crude and condensate exports for 2019.
“The forecast 500,000 bpd drop in exports is dwarfed by the volumes currently being held out of the market by participants in the OPEC, non-OPEC production cut deal. The volume cut has averaged 1.32 million bpd over the life of the deal and stood at 1.92 million bpd as of March,” BMI analysts said.
“Of the production cut, we estimate that around 1.40 million bpd could be returned to market over the next six months,” the analysts added.