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Oil Market Snapshot – November 2018 OPEC+ "Gang of Four" Try to Fix A Hole In The Wallet

Brent tumbles to stand at $60/bbl at time of writing as stock market falls and Trump’s sanction waivers amplify fears of oversupply. Our Brent forecast averages $73.91/bbl (-$0.26/bbl on previous) for 2018 and $78.20/bbl (-$3.33/bbl) for 2019. For 2018, we see a deficit of 320,000 b/d (-70,000 b/d), global production growth of 2.03 million b/d (+70,000 b/d) and global demand growth of 1.5 million b/d (unchanged). We nominally see a surplus of 540,000 b/d (+90,000 b/d) in 2019, with global production growth at 2.32 million b/d (+20,000 b/d) with global demand growth at 1.46 million b/d (unchanged). The majority of this will come from the US, while the potential for substantial increases from OPEC and Russia will likely be curbed through market management policies. Those with discretion over supply form a “Gang of Four” – Saudi Arabia, UAE, Kuwait and Russia – while all other nations are producing as much as they can with mixed results. We expect OPEC and its allies to deepen their cooperation with a fresh deal in the coming months, despite pressure from the US on Saudi Arabia, in a continuation of the market management policy. The UAE energy minister says a deal is agreed, but the magnitude of cuts is not yet confirmed – leaks to the media have mentioned 1.4 million b/d from current levels. Our OPEC production forecast pegs the difference between 2019 production and "call-on-OPEC" at 1.2 million b/d. While the general consensus appears to be that “Trump tweets, Saudi jumps”, we still see Saudi Arabia cutting production in co-ordination with its allies to stem oversupply....

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