Opec decision will lower prices

GIVEN that the Organisation of Petroleum Exporting Countries is set to bring almost a million barrels of oil back on to the market over the second half of this year, there is confidence that prices will trend lower from current levels.
Opec decision will lower prices Opec decision will lower prices Opec decision will lower prices Opec decision will lower prices Opec decision will lower prices

Warren Patterson

This is the prediction from analyst Warren Patterson, who said that Opec was only expected to increase production by around 900,000 barrels per day.
But, as Patterson writes, there are still several question marks hanging over the market.
"Will supplies from Iran fall as a result of US sanctions? And, if so, by how much? How much more will Venezuelan production decline? 
"For Iran, we continue to assume that Iranian supplies will fall by 500,000bpd by the end of this year, while for Venezuela we are estimating that production will fall to 1.2 million bpd, from around 1.5 million bpd currently.
"The obvious risk is that we see steeper declines moving forward. However in theory, with Opec aiming to hit 100% compliance, any shortfalls from Iran and Venezuela should be filled by other Opec members," Patterson writes.
Turning away from Opec supply, Patterson says there are growing concerns over the lack of pipeline takeaway capacity from the Permian in the US to the Gulf Coast.
"Given that further pipeline capacity is set to only come online in the second half of 2019, some US producers may be reluctant to increase drilling activity due to infrastructure constraints. These constraints may mean that there is a risk that US output does not hit the Energy Information Administration's forecast of 11.9 million bpd for 2019."



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