Donghyun Park: There is no need for OPEC to cut production - EXCLUSIVE

"There is no need for OPEC to cut production," economist at the Asian Development Bank (ADB) Economics and Research Department Donghyun Park said.

The OPEC+ ministerial monitoring committee recommended to take a decision on the level of oil production at the meeting of OPEC+ countries in Vienna on June 25-26.

"In my view, there is no need for OPEC to cut production and more generally OPEC to support prices. Because at present moment upper pressures in other words pressures that are pushing up oil prices are larger than downward pressures in prices, so there is no need for OPEC to cut production, to push prices higher. So not necessary at this point."

He believes that oil prices are getting higher, because there is a lot of geopolitical issues.

"For example, as you know, there were some problems in the strait of Hormuz which is a vital water way in transporting oil from Saudi Arabia, Kuwait and other big Middle Eastern oil producers to the world. And if the Strait of Hormuz gets blocked, then the oil prices will jump high. And More Generally there are a lot of geopolitical actors that suggest that oil prices will go higher. For example, the well known political problems in Venezuela and the problems in Libya. And these are major producers, so we expect oil prices to be increasing in the near future. That is good news for Asian oil producers such as Azerbaijan, Kazakhstan and Brunei and some other Asian oil exporters. But the region, as a whole, is a net oil importer so it will probably have a small but significant negative impact on Asia's role," the ADB economist said.

He noted that ADB expect the oil prices to be generally moving up a lot but at the same time we expect a lot of volatility in oil prices because there are a lot of geopolitical factors affecting the global oil market.

Notably, the OPEC+ deal was concluded in December 2016 and was repeatedly prolonged. At the 5th session of the OPEC and non-OPEC states held in Vienna on December 7, 2018, an agreement was reached on reduction of oil output by 1,200,000 bpd from the level of October 2018 with OPEC countries accounting for 812,000 barrels and non-OPEC states responsible for 383,000 barrels of this volume. The agreement is valid for the first six months of 2019. As part of this decision, Azerbaijan assumed to cut daily output by nearly 20,000 barrels starting January 2019.

The average daily oil output in Azerbaijan made 770,000 barrels in January-April 2019. Last year the average daily production amounted to 792,600 barrels.

The price of Azeri Light oil for May 22 reached $74.20 per barrel.