The much awaited decision in the global crude oil market has been made. OPEC+ needs oil prices propped up; The OPEC and the other supply cutting countries led by Russia and known as OPEC+ have decided to extend the agreement to cut 1.2 million barrels per day from the market up until March 2020.
Ignoring the small jumps, oil prices have been finding their way south over the past few months on account of slowing global economy especially US and China as the two powerhouses continue the trade war. Moreover, prices have fallen despite geopolitical factors that include severe US sanctions on Iran and escalated tensions in the Middle East. Two much anticipated global event were being considered to make or break oil prices in 2019 and 2020. Where G20 Summit ended without any bold and direct statement over how China and US will deal with trade war, the OPEC+ meeting in Vienna could only do so much for oil prices.
Despite the announcement to take production curtailment into 2020, oil prices remained depressed. This normally doesn’t happen. OPEC’s production cuts are meant to lift prices. But this time around, the oil market dynamics are overwhelmed with how the global economy is shaping. US, the largest consumer of crude oil has faced with manufacturing downturn. So is China. So unless a solid agreement is achieved between two key consumers of oil, prices are likely to at least hover where they are right now.
Analysts around the world are of the opinion that more action is required from OPEC to regulate the global crude market in the midst of falling demand. One is deeper cuts by Saudi Arabia and other members to push prices through the weak-demand/consumption barrier. Forecasts for prices are down, and weakening oil prices are further strengthened by the fact that the crude oil exports from Argentina and Venezuela recovered in May and June this year.
Both G20 and OPEC meet in Vienna failed to kindle price rally in crude oil. Is it possible for OPEC+ to revise its daily production cut further down from 1.2 million barrels? Doesn’t look like it as both Saudi Arabia and Russia have far exceeded the target recently. Against this backdrop where demand is not likely to pick up, inventories and supplies are expected to rise further in the coming quarters. And as such, higher oil prices - prices that the OPEC world would like – are nowhere in sight.
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