The crude oil production is exceeding the demand as per the oil producers. The oversupply will continue till the first quarter of 2019. The oil prices will remain bearish. Till the month of October 2018, the crude oil prices were four years high. Then it dropped more than third of its value in a month. The supply will be cut in the second quarter of 2019 to raise the prices of oil.
The Story behind the Curb:
US president Donald Trump put political pressure to reduce the oil prices and compensate the oil supply losses from Iran. The Organization of the Petroleum Exporting Countries (OPEC) led by Saudi Arabia, its allies including Russia decided to ease the output curb in June 2018. Thus the oil supply surpassed the demand even though Iran exports less oil. Analyst forecast huge supply with slowing demand. Saudi Arabia and Russia are in bilateral talks to curb the oil output in 2019.
The Plan Ahead:
The output curb amounts to about 1.2 million barrels per day. OPEC, Russia and associated non-OPEC oil producers agreed to cut output from December 2018. This value is equal to 1percent of global demand. This task will exhaust tanks and increase prices of crude oil.
The 15-member organization of OPEC informed that it will reduce 800,000 barrels of oil production per day.
The Saudi Arabian kingdom is expected to cut production by 500,000 barrels per day as per Khalid al-Falih, energy minister of Saudi Arabia.
The world’s second oil producer Russia announced that it would come into any new agreement among producers to cut output. Russia and the associated non-OPEC producers will participate a 400,000 barrels daily output reduction.
The Future Results:
Brent crude oil will trade around $65 per barrel in the first quarter, $68 in the second quarter, $70s in the third quarter and $80 a barrel in the fourth quarter of 2019 as per analysts forecast. The increase in oil prices decreases the demand for oil, a rise in fuel prices, and job loss due to a production cut.