According to the head of Wood Mackenzie’s refining and oils market team in Asia, Sushant Gupta, OPEC looks set to continue its production cuts at least through the entirety of 2020.
Speaking on CNBC business news programme Capital Connection on Monday January 20, Gupta said:
“One thing which we are seeing in our numbers is that the market is still not ready to absorb the production cuts back, even for (the) whole of this year. We expect OPEC to continue cutting production for 2020.”
At its most recent meeting in December, the oil production cartel, together with its non-member participants, agreed to deepened cuts of 1.7 million barrels per day (bpd) on the baseline amount, a decrease of an extra half a million bpd. The latest cuts are subject to review during the next OPEC meeting in March, with no currently indications of production cuts lasting beyond this.
Gupta, however, believes those cuts mean that OPEC acknowledges there will be an oversupplied market, particularly in the first half of the year. Non-OPEC sources are expected to contribute to this supply. For example, Equinor and its partners, including oil and lubricant company Total, recently opened the huge Johan Sverdrup field off the coast of Norway.
With the burden falling on OPEC to manage the oversupply, which Wood Mackenzie expects to persist into the second half of the year to a lesser degree, Gupta claims that it looks likely that OPEC will need to extend the cuts throughout the whole year.