JP Mor­gan sees OPEC cut­ting out­put by 1.2 mil­lion bar­rels

Business a.m. - - ENERGY, POWER & RENEWABLES -

JP MOR­GAN HAS SAID that the Or­gan­i­sa­tion of Pe­tro­leum Ex­port­ing Coun­tries (OPEC) might have to cut its crude out­put by as much as 1.2 mil­lion bar­rels per day to rein in the spi­ral­ing oil prices after it re­vised its out­look on Brent crude to $73 per bar­rel on av­er­age from $83.50/per bar­rel.

Oil prices con­tinue to spi­ral down­wards, Brent crude slumped to $59 over a pos­si­bil­ity of sup­ply glut fol­low­ing in­creas­ing in­ven­to­ries from Saudi Ara­bia and U.S.

The car­tel it­self is said to be dis­cussing cuts of be­tween 1 mil­lion bar­rels per day and 1.4 mil­lion bar­rels per day. Crude pro­duc­tion from the 15-mem­ber car­tel stood at 32.9 mil­lion bar­rels per day in Oc­to­ber.

Scott Dar­ling, the head of the bank’s Asia-Pa­cific oil and gas oper­a­tions, told an­a­lysts that the in­crease in sup­ply in North Amer­ica which will oc­cur in the se­cond half of 2019, would even­tu­ally pres­sure prices even lower in 2020, to an av­er­age of $64/ per bar­rel in that year.

Other in­vest­ment banks might fol­low suit, and would soon be­gin re­vis­ing their fore­casts un­less they are cer­tain that OPEC and its al­lies will agree a pro­duc­tion cut at its Vi­enna meet­ing next month.

This cut is by no means con­crete and is purely spec­u­la­tion, but it might be the only pos­i­tive fac­tor that can work in oil prices’ favour. Even the lat­est pro­duc­tion num­bers from OPEC’s king­pin, Saudi Ara­bia, were bear­ish for prices.

Bloomberg re­ported, cit­ing in­dus­try in­sid­ers that the King­dom’s oil pro­duc­tion since the be­gin­ning of this month jumped to new highs, reach­ing 10.8-10.9 mil­lion bar­rels per day and U.S. stock­piles have risen for nine straight weeks.

Rus­sia has yet to weigh in but a Reuters re­port cit­ing two se­nior Rus­sian gov­ern­ment of­fi­cials said the coun­try would rather not join an OPEC-led cut this time, de­spite the fact that Vladimir Putin, Rus­sian Pres­i­dent said at an in­dus­try event that Rus­sia will co­op­er­ate with OPEC on oil prices.

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