OPEC production cuts not consistent with figures, analyst suggests
OPEC’s agreement last week of a preliminary output reduction raised share prices of drilling service and E&P companies following Brent’s 6% rise.
According toDouglas-Westwood (DW), Saudi Arabia and Iran appear to have set aside their differences to the benefit of the entire industry.
However, there remain big challenges, with Iraq’s delegation disputing OPEC’s estimate of 4.35 MMb/d for its crude production in August.
This is more than 300,000 b/d below Baghdad’s figure of 4.62 MMb/d, so any strategic output could damage the country more than it is prepared for.
Secondly, while OPEC’s assessment of its current members’ production is 33.24 MMb/d, with a proposed cut to 32.5 MMb/d, the actual reduction is likely to be higher than the implied 724,000 b/d, the analyst claims.
DW forecasts that developments due to be brought onstream by all 14 OPEC member countries before the end of 2017 would push production up to 33.62 MMb/d. Some of these developments, including the UAE’s offshoreUpper Zakum project, are close to completion.
Would inauguration be postponed, DW wonders, until market conditions become more favorable?