Energy Preview: Oil Market To Take Cues From Production Adjustments In Major Producing Nations

WTI Crude oil slipped in Asia after nearing its three year highs yesterday. Weak equities are keeping oil under check. The commodity edged up this week after the recent correction following the updates from the latest OPEC/Non-OPEC Joint Ministerial Monitoring Committee (JMMC) convened in Jeddah. OPEC announced that, based on the Report of the Joint Technical Committee (JTC) for the month of March 2018, following successive months of record-breaking performances, OPEC and participating non-OPEC countries have achieved a conformity level of 149% with their voluntary production adjustments, the highest level so far. This is likely to keep oil supportive in near term. The counter is currently trading just above $ 67.50 per barrel. MCX Crude oil futures closed at Rs 4530 per barrel amid choppy moves and should slip towards Rs 4500 levels today.

The JMMC was established following OPEC’s 171st Conference Decision of 30 November 2016, and the subsequent Declaration of Cooperation made at the joint OPEC-Non-OPEC Producing Countries’ Ministerial Meeting held on 10 December 2016 at which 11 (now 10) non-OPEC oil producing countries cooperated with the 13 (now 14) OPEC Member Countries in a concerted effort to accelerate the stabilization of the global oil market through voluntary adjustments in total production of around 1.8 million barrels per day.

The resulting Declaration, which came into effect on 1 January 2017, was for six months. The second joint OPEC-Non-OPEC Producing Countries’ Ministerial Meeting, held on 25 May 2017, decided to extend the voluntary production adjustments for another nine months commencing 1 July 2017. At the third joint OPEC-Non-OPEC Producing Countries’ Meeting, held on 30 November 2017, it was agreed to amend the Declaration of Cooperation so that it will take effect for the entirety of 2018.