Business News

CCTV Script 01/12/16

This is the script of CNBC's news report for China's CCTV on December 1, Thursday.

Welcome to CNBC Business Daily, I'm Qian Chen.

The Organization of the Petroleum Exporting Countries on Wednesday committed its fractious members to their first oil production limits in eight years.

Now comes the hard part.

OPEC has agreed to cut production by about 1.2 million barrels per day, or about 4.5 percent of current production, to 32.5 million barrels per day.

Top oil exporter Saudi Arabia faces the unenviable tasks of policing cartel members and keeping crude prices within a range that will relieve pressure on oil-producing countries' economies, but which will dissuade non-OPEC producers from increasing output.

But OPEC now has a difficult needle to thread. Oil rigs began popping up in U.S. oil fields when prices approached $50 a barrel, and analysts believe high-cost producers outside OPEC will further ramp up production if crude prices rise above $55 a barrel.

That includes U.S. shale drillers, which have built a backlog of partially completed wells in anticipation of a price recovery. Once prices rise, they could switch on that production-in-waiting.

While many see oil prices averaging between $50 and $55 next year, analysts are not united on the path to that level.

[CRAIG MCMAHON, Wood Mackenzie APAC Head of Research] "We need stablized prices above 55 per barrel. A lot of major CEOs in the US say 60, but we believe 55 is actually the key number. But it's not about reaching that premium, but to stablize for a period of time. Only then we think will see the US really remobilize back to growing more production."

Goldman Sachs believes the deal will cause crude prices to spike in the first half of 2017, and then moderate in the second half as both OPEC and U.S. shale producers capitalize on the rally.

But JPMorgan sees prices rising slowly but steadily quarter after quarter.

The bank cautioned that the deal is essentially aimed at preventing an even larger buildup of oil stockpiles. The world's storage facilities are brimming with crude and refined fuels.

Skeptics have long warned that OPEC members are notorious cheaters and may not stick to quotas agreed to on Wednesday in Vienna. But RBC Capital Markets said adherence may not matter so much this time for a simple reason:

OPEC members are near full-tilt, and they don't have much more capacity to pump.

Beyond OPEC, other countries aren't helping out those who hope for higher prices, the International Energy Agency said in its latest oil market report.

OPEC said it is seeking to secure 600,000 barrels per day of cuts from non-OPEC producers, and that Russia has committed to temporarily cut production by about 300,000 barrels per day.

Prior to OPEC's announcement, the IEA said it also expects Brazil, Canada and Kazakhstan to pump more in 2017. That would push total non-OPEC output growth to 500,000 barrels a day next year, compared with a projected decline of 900,000 barrels a day this year.

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