Today.Az » Business » Possibility of price rising depends on oil lost from Iran
17 July 2018 [13:01] - Today.Az
By Sara Israfilbayova
Oil prices have already fallen back in expectations that supply will increase, CEO of Qamar Energy (Dubai) Robin Mills told Azernews.
“Saudi oil output increased already in June before the OPEC meeting. This is likely to lead to a strong effort to keep oil prices around $70-75 per barrel and not above $80. The possibility of prices rising later this year depends on the balance of oil lost from Iran due to sanctions, versus economic growth and the threat of a Chinese slowdown and ‘trade wars’,” the expert said.
Touching upon the issue of the production of shale oil in the U.S., the expert noted that U.S. oil production has expanded rapidly this year but is constrained by pipeline access.
“Therefore probably prices can go higher this year without encouraging a lot more US production. But in 2019, pipelines will expand. OPEC needs a moderate price that does not encourage too much U.S. shale oil production and new pipeline construction in the medium-term,” Mills stressed.
Further, answering the question what other method can be offered to balance the oil market, Mills said that OPEC needs to commit to credible expansions of production capacity – at least the countries that are capable of this, i.e. Saudi Arabia, UAE, Kuwait and Iraq, adding that will gain them market share while keeping long-term prices more moderate and reducing the build-up of competing output.
OPEC and non-OPEC producers reached an agreement in December 2016 to curtail oil output jointly and ease a global glut after more than two years of low prices. OPEC agreed to slash the output by 1.2 million barrels per day from January 1.
Non-OPEC oil producers such as Azerbaijan, Bahrain, Brunei, Equatorial Guinea, Kazakhstan, Malaysia, Mexico, Oman, Russia, Sudan, and South Sudan agreed to reduce output by 558,000 barrels per day starting from January 1, 2017.
OPEC and its partners decided to extend its production cuts till the end of 2018 in Vienna on November 30, as the oil cartel and its allies step up their attempt to end a three-year supply glut that has savaged crude prices and the global energy industry.