Baku, Azerbaijan, July 2
By Leman Zeynalova – Trend:
The US oil and gas sector will not be unhappy with the OPEC decision to extend the oil output cut deal when looking at price levels and revenues, as shale oil and gas is still more costly than conventional production, Cyril Widdershoven, a Middle East geopolitical specialist and energy analyst, a partner at Dutch risk consultancy VEROCY and SVP MEA-Risk, told Trend.
The 176th Meeting of the Conference of the Organization of the Petroleum Exporting Countries (OPEC) was held in Vienna, Austria, on 1 July 2019. In view of the current fundamentals and the consensus view on the outlook for the remainder of 2019, the Conference decided to extend the voluntary production adjustments agreed at the 175th Meeting of the OPEC Conference for an additional period of nine months from 01 July 2019 to 31 March 2020.
“What will be worrying for US customers and refiners is the fact that the OPEC+ production cut roll over still will keep volumes of heavy and middle grade volumes out of the market, which is needed to blend with US shale oil. Without having access to Venezuela and Iran, not a lot of other options are available,” said the expert.
Possible other worry for US, according to the expert, is that even that Iran sanctions are hitting Tehran very hard, higher oil prices will be giving Iran some additional breathing space. “Also the ongoing issues within OPEC and the growing Saudi/UAE-Russia cooperation is worrying for the US and EU.”
Further, talking about the effectiveness of the OPEC decision in preventing the global economy from recession, Widdershoven noted that first of all the weakening of the global economy needs to be reassessed, still a lot of emotions in place, while real crisis is not even on the horizon.
“Secondly, demand for oil has not gone done, has been always increasing, and will be even growing again. If prices would go down, demand would be hitting records, but financing of production would be an issue. There is a growing lack of financing, so prices in the end will go up,” added the expert.
Stability is always better for a global economy than volatility, the expert believes.
“Higher oil prices have almost no real detrimental effects anymore on the economy, the latter can adjust simply. Demand is still going to grow, especially Asia, Eastern Europe, Middle East and Africa. Growth especially in India, Indonesia, China. Supply will become the issue as not a lot of swing production is available, and we need supply of the right crude grades, not only shale oil.”
---
Follow the author on Twitter: @Lyaman_Zeyn
