The countries from the OPEC+ group may give up their agreement to cut production if the price of oil exceeds 70 USD per barrel. This can happen earliest on their next meeting in June.
To reduce the oil prices to the comfortable 50-60 USD per barrel, the production may increase. The question is only how much prices can fall if the US yields continue to increase.
At the beginning of the week, the Russian Energy Minister Alexander Novak suggested that OPEC yield may return to its previous level after June if global demand exceeds supply. Russian President Vladimir Putin, commenting on the situation on the oil market, noted that Moscow is not a supporter of an uncontrollable rise in prices and that his country is “fully satisfied with current prices”.
The price of Brent oil, which is a reference for the European market, in early April exceeded the threshold of 71 USD per barrel for the first time since November 2018, when market volatility increased due to US sanctions against Iran. According to experts from the International Energy Agency (IEA), which this week publishes its monthly report, raising prices above this threshold is uncomfortable for consumers during the slow pace of economic growth.
In its April report, the IEA kept unchanged its forecast for the growth of oil demand in 2019 at 1.4 million barrels per day. The oil inventories of the OECD countries in February were again 16 million barrels above the five-year average.
The rate of increase in oil supply from non-OPEC countries will slow down in 2019 and will shrink by more than 1 million barrels per day to 1.7 million barrels, shows the IEA report.
The oil production growth in the countries outside the cartel in the second half of 2018 reached a stunning pace of 3.4 million barrels per day on an annual basis. But in the first quarter of the year, it slowed down to 2.4 million barrels, of which 92% was the increase in US mining.
For this year, the IEA expects an increase of 1.6 million barrels per day in the United States to be 1.6 million barrels per day, of which 0.4 million barrels will be from the shale oil.