The market is balanced between several price supportive factors against downward pressure due to concerns the trade war could affect the global economy negatively, Ann-Louise Hittle, vice president, Macro Oils, at global natural resources consultancy Wood Mackenzie told Trend.
The concern is the resulting slowdown in oil demand growth would cause an oversupply especially since several key OPEC producers are increasing their output currently in order to offset losses from Venezuela and Iran, she believes.
"On the price supportive side is the US effort to remove all of Iran's oil exports from the market by November 2018. We expect Iran's oil production to decline by 0.8 million b/d by the end of 2018 and further downside risk to Iran's oil exports cannot be ruled out," noted Ann-Louise Hittle.
The analyst pointed out that those OPEC producers who have spare productive capacity are increasing output to offset the losses as agreed at the 22-23 June 2018 OPEC meeting with its non-OPEC partners.
"However, the increases in production reduce the cushion of excess capacity which means less is available to meet future supply outages, if they were to occur in H2 2018 or in 2019. That would be strong upward pressure on oil prices," she added.
In December 2016, at a meeting of oil producers in Vienna, 11 non-OPEC member countries, including Azerbaijan, agreed to cut oil production by a total of 558,000 barrels a day. The agreement was concluded for the first half of 2017 and was extended until the end of the first quarter of 2018 at a meeting on May 25, 2017.
At the last OPEC meeting in Vienna, the agreement was again extended until the end of 2018. Azerbaijan supported the decision.
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