Page 17 - ISQ UK_October 2017

APRIL 2019

OPEC Members

What’s on the Cards for Oil?

Pavel Molchanov, Senior Vice President, Energy Analyst, Equity Research

Q. OPEC and Russia agreed late last year to cut crude even without deliberate
production by a collective 1.2 million barrels per curtailments. Case in point:
day (bpd) for the first half of 2019. To what extent “It is important to Venezuela. This country has
underscore just how
has the group been fulfilling its promises? already had the world’s steepest
impactful the IMO 2020
A. By way of historical background, OPEC generally has a mixed policy will be.” drop in oil production since 2015,
for purely domestic reasons.
track record for member compliance with its production Amid the current political and
decisions. The smaller oil producers in the group rarely cut economic crisis, the national oil
production in accordance with the official pledges. However, company, Petróleos de Venezuela, S.A. (PdVSA), continues to
as a practical matter, only a handful of OPEC countries truly suffer from mismanagement and severe cash flow shortages.
matter when it comes to managing global oil supply. Saudi Meanwhile, production in Libya and Nigeria is perennially
Arabia is by far the most important, and for the past two years choppy due to recurring violence around oilfields. Looking
it has played a very proactive role in this regard.
past this choppiness, the longer-term trend in both countries
Based on data from the past several months, we estimate that is downward due to insufficient foreign investment given the
Saudi production in the first quarter of 2019 is tracking to be hazardous conditions.
nearly 600,000 bpd less than in the fourth quarter of 2018. This
alone represents half of the total pledged production cut Q. The International Maritime Organization (IMO)
across all of OPEC and Russia. So, it is clear that Saudi Arabia is has set regulations to cut sulphur in fuel used by
serious about propping up oil prices – it is not just lip service! the marine industry starting in January 2020.
How are shipping firms and refiners preparing for
Beyond Saudi action, let’s also bear in mind that several
OPEC countries are experiencing organic production declines this? How do these regulations affect the global
oil market?

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