Page 5 - MEOG Week 23
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MEOG Commentary MEOG
approach to cheating, but it’s unclear how they will be the backbone of a quick recovery for the
can get Iraq to actually comply with the deal,” energy industry,” said Bjornar tonhaugen, Rys-
said Mohammad Darwazah from consultant tad Energy’s head of oil markets.
Medley Global Advisors. “That is due to the oil stocks decrease that
we will see as a result of the production deficit.
Price bounce stocks are now what keep prices at relatively low
so far, the production curbs have been effec- levels and the quicker they fall, the faster we will
tive. The price of crude rallied by almost 90% see prices rise.”
last month, a record gain, as shrinking supplies The cuts would then begin to taper. From July
helped to offset pandemic-related demand through the end of 2020, 7.7 million bpd would
losses. be taken offline, followed by 5.8 million bpd
Ahead of the meeting, the oil market dis- from January 2021
played optimism over an agreement. On Friday While the final OPEC+ statement said that
West texas Intermediate jumped 5.72% to settle all participants support the accord, it later tran-
at $33.56, while international benchmark Brent spired that Mexico will not cut its production for
crude gained 5.78% to settle at $42.30. It was another month. While the lone dissenter said it
each contract’s sixth straight week of gains, and would stick to the original agreement, its reluc-
the highest price since March 6. tance to cap its crude production was one of the
“today we have grounds to be cautiously main stumbling blocks in finalizing the long-an-
optimistic about the future, but we are not out ticipated oil deal back in April.
of the woods yet and challenges ahead remain “Mexico’s position was clear from the begin-
to be seen,” saudi Arabia’s Energy Minister ning, in April. It came as no surprise to anybody
Prince Abdulaziz said in opening remarks as the that they are not willing to reduce production in
OPEC+ meeting began. He urged the group to July,” Iran’s OPEC governor Amir Hossein Zam-
display unity and come to a swift decision. aninia said after saturday’s meeting.
“together we are stronger, together we can Mexico’s defection from the pact means it will
restore stability to oil markets and help rebuild be able to resume its efforts to boost output in
the global economy,” he said. line with President Andres Manuel Lopez Obra-
One ongoing issue for OPEC+ has been dor’s promises. Mexico’s contribution is just
nations not abiding by their prescribed quotas, 100,000 bpd, with another 250,000 compensated
and saturday’s agreement is contingent upon for by the Us.
greater levels of compliance. Nations that have The rise of American oil production could
failed to curb output by their allocated amount also be a headache for the oil market, which has
must enact additional cuts in July, August and just started to rebalance. According s&P Global
september in order to make up for non-compli- Platts, the oil prices rally has already prompted
ance in May and June. several Us shale operators to scale back their
“today’s deal is a positive development and, production curtailment plans. the next few
unless a second Covid-19 wave hits the world, it weeks are sure to be interesting.
Week 23 10•May•2020 www. NEWSBASE .com P5
