Private OPEC Report Suggests Low Bunker Prices for Several Years, Pressure on Crude Prices Until 2019

OPEC expects expects crude prices to remain under pressure through to 2019

A leaked internal Organization of the Petroleum Exporting Countries (OPEC) report has revealed that the organization expects crude prices to remain under pressure through to 2019, Reuters reports. 

The document purportedly puts the 2015 OPEC basket price at $55 per barrel in 2015 and rising by $5 per year to reach $80 per barrel by 2020.

Given that IFO380 bunker prices have until recently been priced at 70 to 75 percent of Brent, but are now little more than 60 percent of Brent, should OPEC's forecast play out bunker buyers may not see product priced at over $400 per metric tonne (pmt) until after the turn of the decade.

OPEC is expected to stick to its new strategy of maintaining output to keep its hold on market share, with the expectation being that non-OPEC supply will fade over time.

"It is ... assumed that tight crude (shale oil) and unconventional NGL (natural gas liquids) supply will reach a maximum at some point after 2020 and then start to decline slightly," said the report, which also forecasts that OPEC's share of the market will rise to 37 percent from its current 33 percent by 2040 in such a scenario.

Oil is also expected to top $162 per barrel by then, which would equate to $94 in 2014 dollars when adjusted for inflation.

However, the report also details a situation where non-OPEC supply remains steady, which stands to have long-lasting implications and provides insight into why defending market share has been given such a high priority.

"OPEC crude production would reach its lowest point in this scenario at 28.7 million bpd (barrels per day) in 2023," the report said.

"The resulting range for OPEC crude in 2040 amounts to 9.4 million bpd, which highlights the challenges for member countries' long-term investment decisions."

Ship & Bunker reported last month that OPEC's policy-deciding meeting among members is scheduled for early December, with that meeting expected to produce a final outcome on whether the organization will move to limit its production.