TODAY.AZ / Business

Oil prices to rise or stay put?

08 October 2015 [18:00] - TODAY.AZ

/By AzerNews/

By Gulgiz Dadashova

Although earlier this week oil prices showed signs of recovery, the world’s vast oil glut that sent prices collapsing by 60 percent since mid 2014 continues to disappoint energy exporting countries.

Global crude prices showed one-month peaks on Tuesday, following Russian military actions in Syria, a weak dollar and expectations from the upcoming OPEC meeting.

In late afternoon London deals, Brent North Sea crude slated for delivery in November rallied $2.45 to $51.71 per barrel. The U.S. benchmark West Texas Intermediate, also lined up for delivery in November, jumped $2.03 to $48.29 a barrel from Monday’s close.

However, the price of oil went in different directions in world markets later. The cost of the US Light crude oil decreased $1.38 to stand at $47.96, while the price of the Brent crude in the London ICE fell $0.95 to trade at $51.48. The price of a barrel of Azeri Light crude oil increased $0.19 to stand at $54.18 in the London exchange.

Russia’s military actions in Syria have increased supply-side risks in the Middle East region. However, experts warn that Moscow’s direct intervention in Syria could result in all sides involved in the global oil price war, digging in deeper and maintaining their current policies of driving the cost of a barrel even lower.

Edward Chow, a senior fellow at CSIS Energy and National Security Program, sees the recent oil price increases as a technical rebound after a period of below $50 prices, “which has very little to do with the Syria crisis.”

“This rise in prices may or may not hold since supply continues to exceed global demand and price may yet go back down below $50 again,” he wrote in an e-mail to AzerNews.

The crude prices shock was partly caused by booming shale oil production in the United States and OPEC’s decision to keep its production target unchanged. OPEC’s 12 members pump out one third of the world’s crude.

The Cartel will hold its next scheduled output meeting on December 4. However, Chow doesn’t advise watchers to expect much from the OPEC meeting.

“It is too early. OPEC will likely wait to see more recovery in demand growth and decline in non-OPEC production, perhaps by next spring, before doing anything,” he said.

The US JP Morgan Bank analysts also believe that OPEC is not yet ready, willing, or necessarily well advised to shift its strategy to prop up oil prices. “Internal disagreements still seem prevalent, and there remains no credible buy-in from non-aligned petroleum exporters, e.g. Russia, despite ongoing discussions,” analysts said in a report obtained by Trend.

Meanwhile, the US expects global petroleum consumption to grow by 2.4 percent in 2015-2016 from 2014 figures.

The global consumption of liquid fuels in 2015, in particular, is projected at 93.79 million barrels per day (compared to 92.45 million barrels per day in 2014), says an October short-term forecast from the Energy Information Administration (EIA). The global consumption of liquid fuels is projected at 95.2 million barrels per day in 2016.

Brent crude oil prices will average $54 a barrel in 2015 and $59 a barrel in 2016, while West Texas Intermediate (WTI) crude oil prices will average $50 a barrel and $54 a barrel in 2015 and 2016 respectively, according to EIA forecasts.

Projected U.S. crude oil production has averaged 9.2 million barrels a day so far in 2015 and 8.9 million barrels per day in 2016.

URL: http://www.today.az/news/business/144245.html

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