Crude oil should rebound to $50 a barrel (Bbl) by year’s end, possibly helped by supply cuts from producer-members of the Organization of the Petroleum Exporting Countries (OPEC), one well-respected industry forecaster says.
“They [OPEC members] want $50 oil, this is going to become the new anchor for global oil prices,” Gary Ross, executive chairman of consultancy PIRA Energy Group, told Reuters.
“While it may not be an official target price, you’ll hear them saying it. They’re trying to give the market an anchor.
If Saudi Arabia and other powerful Gulf OPEC members begin invoking $50 as “fair price for producers and consumers,” it could signal the end of a period in which the group exchanged managing the market and prices for market share, Kallanish Energy reports.
Instead of slowing production and thus allowing prices to rise OPEC – Saudi Arabia – kept pumping and allowed prices to drop. While no one anticipated the longest and deepest crude price plunge in roughly three decades, the effort at last is beginning to reign in high-cost producers, including U.S. shale players.
In his research note to clients, Reuters reported Ross also pointed to the recent agreement between major OPEC members and leading non-OPEC producer Russia to “freeze” production at January levels as a factor boosting market sentiment.
The pact will do little to curb immediate oversupply, especially with Iran exports still swelling after the end of sanctions. Still, working together on “verbal intervention” was a positive start that “could lead to eventual cuts” after a period in which Saudi Arabia and Russia made little effort toward any kind of cooperation, he said.
“Russian production is going down anyway, why not agree to a freeze and then cuts?” Ross told Reuters.
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