Fitch rating agency believes that OPEC’s decision to extend production cuts by nine months should provide some support for oil prices.
Report informs referring to agency, Fitch warns that a production surplus can return in 2018.
According to the Fitch’s analysis, a production surplus could return in 2018 if the deal is not rolled over again, as new projects continue to come online and US shale production is set to grow.
OPEC’s appetite to extend cuts further into 2018 may be reduced if crude stocks remain resilient and market prices subdued. OPEC could decide to return production to pre-cut levels as the cartel may not want to lose its market share and look to raise revenues through volumetric growth.
Fitch believes the average annual oil prices for this year are likely to remain around USD50-55/bbl, while long-term assumption is 65 USD/bbl.
