ASSESSMENTS

OPEC+ Will Maintain Course Headed Into 2020

Dec 3, 2019 | 21:23 GMT

This illustration shows the OPEC logo and an oil pipeline.

Members of the OPEC+ coalition are not likely to alter the terms of their production quota deal when OPEC ministers gather Dec. 5 in Vienna, Austria.

(Maxx-Studio/Shutterstock)

Highlights

  • Most OPEC+ states have accepted that efforts to support higher prices have failed and that it is worth risking a dip below $60 per barrel next year to avoid stimulating growth of competing supplies.
  • The communique after the OPEC ministerial meeting concludes on Dec. 6 will tout stricter compliance for production targets essentially as a cut of around 500,000 barrels per day, but the reality will be far less.
  • Russia has played the cartel politics game more skillfully than Saudi Crown Prince Mohammed bin Salman, with Russian production currently at a slightly higher level than when it first agreed to output limits in December 2016.

When they meet Dec. 5-6, the members of the OPEC+ coalition are likely to agree to extend current oil production quotas until at least the end of June 2020 and possibly longer, despite renewed media chatter on Dec. 2 suggesting the Saudis are considering supporting a deeper cut in support of the Saudi Aramco initial public offering. This outcome is at least mildly bearish relative to current market positioning, given the probability of a return to global oversupply in the first half of 2020. Despite being relative price hawks since 2016, Saudi Arabia seems to have accepted that it is not in a position to push others to do more, even as the final IPO price of Saudi Aramco will be determined Dec. 5....

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