With their next meeting just weeks away, OPEC and its partners are showing no impetus for stronger action to support oil prices. But without intervention, some influential forecasters say a new supply glut could send the market crashing early next year.
Brent crude prices, trading at about $62 a barrel in London, may tumble almost 30 percent to $45 a barrel if the Organization of Petroleum Exporting Countries and its allies don’t announce deeper production cutbacks, according to Morgan Stanley. Citigroup Inc. and BNP Paribas SA predict a slide to the low $50s.
That would intensify the strain on group members such as Venezuela, Iran and Iraq, which are already reeling from economic crises and political unrest. It would also ripple through the rest of the industry, hitting the shale boom that has transformed the U.S. into the world’s biggest oil producer.
“The prospect of oversupply looms over the market in 2020,” said Martijn Rats, global oil strategist at Morgan Stanley. “Either OPEC deepens its cuts, or prices will fall to about $45 a barrel, and force a slowdown in U.S. shale that balances the market.”
Oil supplies from outside OPEC are set to expand twice as fast as global demand next year, as a fragile economy crimps consumption while new supplies flood in from the U.S., Norway and Brazil, the group’s data show. If Saudi Arabia, Russia and others who reined in production this year don’t deepen the cutbacks when they meet in Vienna on Dec. 5 to 6, prices will almost certainly weaken, the banks say.
While OPEC Secretary-General Mohammad Barkindo said the group and its partners are prepared to do “whatever it takes” to prevent another rout, delegates say that the biggest producers in the coalition aren’t pushing…
Source: FuelFix
