OPEC+ Will Need to Extend Cuts
It seems increasingly that between inventory builds and price action OPEC+ will need to extend production cuts into the second half of the year.
That’s what Jason Gammel, an equity analyst at Jefferies, stated in a research note sent to Rigzone on Friday. The Jefferies representative added, however, that Russian “intents” are “murky at this point”, something he said was perhaps another contributor to the oil price decline.
In the research note, Gammel highlighted that Brent prices are down 18.7 percent over the 29 trading days since an April 24 peak. An action which he says matches the severity of the fourth quarter 2018 decline to that point.
“There was a lot of pain yet to come then, but the forward curve had already shifted to contango at that point. Brent currently remains in backwardation, implying a tight market despite the massive inventory builds in the United States,” Gammel stated in the note.
“The supply-side concerns have materialized in May: Iranian exports were down to about 400,000 barrels per day (bpd); Venezuelan exports fell to 875,000 bpd; and Russian exports fell by 400,000 bpd month on month due to contamination issues on the Druzbha pipeline,” he added.
OPEC is currently scheduled to meet in Vienna on June 25 and a combined OPEC and non-OPEC meeting is planned in the city for June 26, according to the organization’s website.
Last month, OPEC revealed that the joint ministerial monitoring committee had reaffirmed its commitment to achieving a balanced market and working towards oil market stability.
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