After the decision of the Organization of the Petroleum Exporting Countries (OPEC) and OPEC + to extend its oil cut to March 2020, Wood Mackenzie estimates that International benchmark Brent oil will average $69.50 per barrel in the second half of 2019 and $68 per barrel for 2019 as a whole, the company said in a statement late Tuesday.
OPEC and 10 non-OPEC countries including Russia, dubbed as OPEC+, agreed to extend the oil production cut deal until March 2020 in a bid to balance the oil market, the cartel announced Tuesday.
Ann-Louise Hittle, vice president, Macro Oils, at global natural resources consultancy Wood Mackenzie said in a statement that the agreement would help balance the market from 2020 onwards.
'This will allow OPEC+ to decide whether to continue production restraint for the rest of the year, or to adjust quotas. The next ordinary meeting on 5 December 2019 allows the group a chance to reassess 2020 fundamentals,' she explained.
Hittle declared that the agreement was carefully coordinated. OPEC made its announcement on July 1, with the broader OPEC+ group confirming continued production restraint the following day.
She explained that output curbs would remain in place through 2019 and into the first quarter of 2020, under the current terms.
'In addition, a non-restricting charter was issued declaring continued cooperation between OPEC and any willing non-OPEC producers to manage the market in the best interest of producers, consumers and investors,' she added.
Hittle stated that despite the heightened tension between the U.S. and Iran, the impact on oil prices was limited, with prices rising slightly on July 1.
'They dipped today [Tuesday, July 2] but rose again on rumors of a potential U.S. attack on Iran. As the U.S. standoff with Iran continues, so will speculation. This will have a varying effect on oil prices, depending on how tightly balanced the market is at the time,' she explained.
She also said that Wood Mackenzie expects continued production restraint at current levels through 2020 to offset the impact of strong non-OPEC supply growth.
'For 2019, the markets will see a tight balance between supply and demand for the remainder of 2019 because of the impact of U.S. oil sanctions on Iran and Venezuela,' she said.
Following the OPEC and OPEC+ meeting on Tuesday, Brent was trading at $62.88 per barrel on Wednesday at 07.15 GMT for a 1.41% loss after it ended the previous session at $63.78.
American benchmark West Texas Intermediate was at $56.38 a barrel at the same time for a 1.26% decrease after closing the previous day at $57.11 per barrel.
By Gulsen Cagatay