Oil prices have been surging throughout 2019 as OPEC continues to cut its oil supplies in an effort to boost what were lagging prices back in 2018. Futures markets have been making their own gains, with gasoline futures settling today at their highest point since October 30 last year. Additionally, OPEC cuts have seen the output reduced to the lowest point seen since almost four years.
On Wednesday, U.S. benchmark crude prices dropped as the U.S. government revealed data concerning it’s rising domestic output and stockpiles. Overall, American energy companies are expecting drastic increases in output over the coming years, with much of this coming from Shale production in the area.
However, these news announcements have the effect of dropping oil prices. Weak Chinese economic data has also been contributing to declines in prices. However, the global benchmark prices ended today on an upturn as output cuts from OPEC continue.
“Saudi Arabia’s continued output discipline and Venezuela’s struggles under US sanctions led OPEC’s crude oil production in February modestly lower to 30.80 million barrels per day,” an S&P Global Platts survey of industry officials, analysts, and shipping data found. “The figure is a 60,000 barrel per day drop from January and is OPEC’s lowest output level since March 2015, when Gabon, Equatorial Guinea and Congo had yet to join the organization but Qatar was still a member. The 11 members with quotas under the deal achieved 79 percent of their committed cuts in February, and remain 170,000 b/d above their collective ceiling. This is a slight improvement on January’s 76 percent, with Nigeria and Iraq producing far in excess of their cap.”
OPEC and ten partner countries spearheaded by Russia agreed to collectively reduce around 1.2 million barrels a day in oil output for the first half of 2019, with the OPEC handling around two-thirds of this reduction. Since then, prices have increased over 20 percent, as opposed to the 40 percent drop in price seen throughout the last quarter of 2018.
But while the rise in oil prices is expected to continue for a while yet, many have stated that they expect overall prices to equalize in 2019 as America’s increasing energy output equalizes the effect of constricting OPEC supplies. According to The Wall Street Journey, analysts from Goldman Sachs expressed said the very same thing to their clients today.
“The fundamental backdrop sets the stage for a tight second quarter,” they said. “Permian basin pipeline expansions with adequate export capacity will de-bottleneck U.S. shale supplies into the global export markets.”
Next year’s oil prices are expected to be in the $63 to $68 per barrel range according to expectations from 11 investment banks. However, the coming years could see some problems for OPEC, with America’s growing energy independence and eventually oil exports will further exert downward pressures on prices. As such, these countries won’t be able to increase production quantities anymore unless they’re willing to see drastic drops in the price of oil. At the same time, should other producing nations such as Venezuela stabilize, prices could take a further hit and impact these heavily oil-reliant nations.