OPEC+ agrees to overall cut oil production, brent crude price to recover further above USD 70/bbl in short term

OPEC+, the group that consists of the Organisation of Petroleum Exporting Countries and a group of oil producing nations outside OPEC, including Russia, agreed to cut production by 1.2 million barrels per day with effect from January.

According to secondary sources, the output reduction will be based on the level of production in October. OPEC will contribute 800kb/d, while Iran, Libya and Venezuela are exempted from the deal, and non-OPEC will contribute the remaining 400kb/d. The deal is set to last for six months and will be up for review in April, noted Danske Bank in a research report.

“Oil market fundamentals are turning more positive for the oil price. The OPEC+ output cut deal will bring OPEC+ production back to its level at the beginning of the year. The US government is done selling off strategic reserves for now. Furthermore, there is risk of further output loss in Iran and Venezuela in the coming months as sanctions continue to bite”, stated Danske Bank.

Brent crude price is expected to recover further above USD 70/bbl in the short term and to average USD 85/bbl in 2019.