The Organization of the Petroleum Exporting Countries, aka OPEC, and its allies on Friday agreed to reduce overall production levels by another 500,000 b/d from January through March.
The 24-member cartel has since July been curbing oil output collectively by around 1.2 million b/d. The latest cutback increases the total pullback overall to 1.7 million b/d through March.
Several participating countries, led by OPEC leader Saudi Arabia, plan to continue additional voluntary contributions, leading to a reduction of more than 2.1 million b/d.
The announcement came on the heels of an initial public offering by state-owned Saudi Arabia Oil Co., which is set to begin trading on Wednesday (Dec. 11) as it works to broaden its reach beyond oil.
OPEC said it was “reaffirming the continued commitment of the participating producing countries...to a stable market, the mutual interest of producing nations, the efficient, economic and secure supply to consumers, and a fair return on invested capital.”
At the ministerial meeting in Vienna, the cartel and its allies discussed the “immediate oil market prospects and the outlook for 2020, the potential consequences of these developments on global inventory levels, as well as overall market and industry sentiment…”
The ministers “reaffirmed their continued focus on fundamentals for a stable and balanced oil market, in the interests of producers, consumers, and the global economy.”
Of note, ministers gave a positive nod to the United Nations Climate Change Conference, aka COP 25, underway in Madrid through Friday (Dec. 13). The global oil and gas industry has come under increasing scrutiny as investors focus more on environmental, social and governance issues.
“Climate change, environmental protection and sustainable development are major concerns for us all,” OPEC and its allies stated at the ministerial meeting. The next OPEC meeting is scheduled for early March.
The cartel faces an onslaught of oil production competition, mostly from the United States. Rystad Energy in a recent report said oil output from countries not members of OPEC could grow at “record speed in 2020,” creating a major headache for the cartel.
Rystad is forecasting total non-OPEC production (crude and condensate) will grow by around 2.26 million b/din 2020, eclipsing the 40-year old record by a wide margin.
“The record high production growth from non-OPEC tight oil and offshore puts significant pressure on OPEC’s ability to balance the oil market in 2020,” said Rystad’s Espen Erlingsen, head of upstream research.
“Rystad Energy believes that OPEC will need to extend and deepen production cuts if they have any hope of supporting the oil price in the near-term.”
The United States tops the list of non-OPEC countries likely to see the fastest production growth in 2020, followed by Norway and Brazil. Norwegian production growth in large part is to be driven by the Johan Sverdrup project, as well as smaller projects such as Oda, Valhall West Flank and Trestakk.
“Although a rather mature producer, Norwegian production growth may reach an all-time high next year, boosted by a bevy of young finds,” Erlingsen said.
Brazil oil output is seen growing in 2020 thanks to its Buzios, Lula and Lara projects.