Biggest Negative Risk for Oil Price

Biggest Negative Risk for Oil Price
The biggest negative risk for the price of oil after the OPEC+ decision is a larger slowdown in the world economy.

The biggest negative risk for the price of oil after the OPEC+ decision is a larger slowdown in the world economy.

That’s according to Bjorn Tonhaugen, head of oil market research at Rystad Energy, who told Rigzone that the OPEC+ decision will help the price stabilize and partially recover during 2019 but will “not likely bring oil back up to $75-$80 levels anytime soon due to the growth in U.S. shale”.

“Oil prices reacted positively initially because the market, based on the news flow before the decision, priced in a probability of a smaller cut … also there was a risk of no-deal,” Tonhaugen told Rigzone.

“Therefore, the market reacted positively initially but that may fade first before prices recover somewhat,” he added.

In a statement sent to Rigzone on Monday, EY’s Global Oil & Gas Senior Analyst, Paul Bogenrieder, said “time will tell around the continued trajectory of prices and how that will impact shale production growth”.

OPEC+ production cuts are effective as of January 2019 for an initial period of six months. The contributions from OPEC and non-OPEC will correspond to 800,000 barrels per day and 400,000 barrels per day, respectively.

In a recent television interview with Bloomberg, Suhail Mohamed Al Mazrouei, UAE minister of energy and industry and president of the OPEC conference, revealed that the move to cut 1.2 million barrels per day from the market was not easy.

“The market have asked us to take action and increase production a few months ago and we did. So to come and convince all of those countries that you need to reverse that and go and remove production again was not easy,” Mazrouei said in the interview.

The next OPEC and non-OPEC ministerial meeting is scheduled to convene in Vienna, Austria, in April next year.



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