Over the next two days, the markets are watching with great interest the convening of the OPEC meeting in addition to a number of allies, led by Russia to discuss the developments in the oil market, and the commitment of countries to the OPEC + agreement to reduce the global supply of oil by 1.2 million barrels per day, which ends in March, especially as prices Oil is highly affected by this agreement, and through this report we monitor you some of the issues that the market traders are concerned about the OPEC meeting, and the likely scenarios about this meeting, as follows:
First, the objective of the OPEC + agreement
OPEC and a number of its allies, led by Russia, are committed to an agreement to reduce the global supply of crude oil by 1.2 million barrels per day until the end of March, in order to eliminate the glut of oil supply, maintain the balance of markets, and support the current price levels of oil, which had fallen significantly Before the start of commitment to the agreement to reduce oil supply.
This agreement has contributed significantly to reducing production in the market, and support price levels, in addition to the return of the balance between supply and demand in the markets significantly, and therefore there is a desire on the member states to maintain such an agreement to maintain the balance of markets, especially with continuing concerns about the trade war And slowing global economic growth, which could negatively affect the growth of global demand for crude oil.
Second: Member States’ position on OPEC +
Some OPEC and non-OPEC countries have expressed their desire to maintain the OPEC + agreement over the next year in order to maintain the balance of markets, especially in light of fears of slowing global economic growth, in addition to the United States significantly increased production levels of crude oil, which hit the highest level ever In the last period. Among the countries that have expressed support for the extension of the agreement, Iraq and Oman, in addition to the issuance of some reports that all OPEC members support the extension of the agreement next year.
Nonetheless, the question now is about boosting production cuts next year that OPEC members might support, but could be challenged by Russia, the world’s largest oil producer and a partner in the OPEC + deal. Thus, Russia’s position in promoting production cuts next year will be the most important and most prominent element in the position of OPEC and its allies on the agreement to reduce oil production next year.
Third: Possible Scenarios on OPEC +
Initially, the most likely scenario is that countries will agree to extend the production cut agreement until the end of next year at the same levels, estimated at about 1.2 million barrels per day. This scenario will not provide much support for oil prices at the moment, and will depend largely on the recovery. World economic next year, increased demand for crude oil, which would support long-term prices.
The other scenario is that OPEC and its allies agree to boost production cuts by an additional 400,000 bpd to 1.6 million bpd at least until the end of June. This scenario would support higher oil prices in the short and medium term, especially with the possibility of reaching To solve the trade tensions between China and America.
Finally, the highly unlikely scenario is to refuse to extend the OPEC + agreement or postpone OPEC’s decision until March to see the recovery of global growth, but this decision would contribute to the immediate reduction of oil prices, and this impact may extend the markets in the medium term.