OPEC likely to extend production cuts
UPDATE: This week's OPEC meeting in Vienna culminated today in a smooth rollover of production cuts through 2018, with a potential escape clause set for their June meeting. OPEC and non-OPEC countries - notably Russia - agreed to keep the current production restraint in place through 2018, which matches the base case assumption for our price forecast from July 2017.
With the rollover in place and the same level of adherence through 2018, we expect a 1.8 million b/d year-on-year gain in world oil supply. With the extension, the supply and demand balance tightens in H2 2018 and helps lift prices in the second half of the year. We expect a pullback in H1 2018 because of resumption of oversupply in the first two quarters.
The June review allows OPEC and non-OPEC to reconsider production cuts. Our current forecast is based on oil demand growth of 1.2 million b/d in 2017 and 1.4 million b/d in 2018, but a colder than expected winter, for example, could lift Q1 2018 demand higher than projected and tighten the market.
PREVIOUSLY: Ahead of Thursday's OPEC meeting, Ann-Louise Hittle, Vice President, Macro Oils, commented on the likelihood of a 9-month extension of the current production restraint agreement.
Ms. Hittle also spoke with CNBC about the implications across the global market, including downward pressure on oil price should the deal not be extended.
An agreement to keep production restraint from OPEC and the cooperating non-OPEC producers would match our base case assumption, made in the early July Macro Oils Monthly Update, to extend production restraint through 2018.
Read more in the latest news:
Bloomberg: OPEC's Easy Win Masks Tougher Oil-Market Choices Still to Come
The Times: Opec nations agree to keep limit on oil output to end of 2018
FT: Oil production cuts set to be extended throughout 2018
Les Echos: P?(C)trole : les quotas de production sont prolong?(C)s jusqu'? la fin 2018