ASSESSMENTS

The World's Oil Producers Prepare for a New Era of Low Prices

Jan 7, 2019 | 10:00 GMT

An Austrian soldier guards OPEC headquarters in Vienna on Nov. 29, 2016, ahead of a meeting by the organization.

(JOE KLAMAR/AFP/Getty Images)

Highlights

The oil market is likely to remain oversupplied in 2019, leading OPEC and non-OPEC countries to cut production to prevent another collapse in prices similar to 2014-15.
Prices are likely to remain weaker than what many of major producers anticipated just three months ago.
Venezuela will find itself in a most difficult spot because lower revenue will drive competition among the country's political elites, exacerbating its political crisis.
For the United States, the domestic impacts will be both positive and negative, but Washington may now have the freedom to lean heavily on Iran's oil customers and force them to reduce those imports even further.
Saudi Arabia will encounter difficulties because it must use state-led development — financed through oil revenue — to achieve Crown Prince Mohammed bin Salman's ambitious reforms.

Heading into 2019, oil producers are getting the feeling that they've seen this market before. That suspicion was reinforced last month when the price of global benchmark Brent crude briefly fell below $50 for the first time since June 2017. In addition, for the second time in five years, declining oil prices have forced global oil producers to stabilize the market by cutting production by 1.2 million barrels per day (bpd). And for the second time in those five years, producers will have to deal with the consequences of low prices, even if the pain might not be as bad this time around....

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