Baku, Azerbaijan, Apr.21
By Aygun Badalova - Trend:
The rebalancing process on the oil market is well under way, especially in North America where US and Canadian high cost producers are forced to cut production, Ole Hansen, head of commodity strategy at Saxo Bank, told Trend Apr.20.
"The continuous rise in global demand and the slowdown in non-OPEC production will help support the price over the coming months," he said.
Following the capital expenditure cuts worth billions of dollars, the market focus will eventually shift from oversupply to lack of supply, said Hansen.
The oil worker strike in Kuwait had a major supporting impact up until Wednesday when it was called off, he added.
The Saxo Bank representative said that the increase in production from Iran, and a stabilizing Libya raises the prospects of barrels returning from Libya which used to produce 1.6 million barrels per day and now only around 300,000.
"The failed Doha meeting of oil producers indicates that the risk of political impact on oil prices has increased," he said.
The oil producers' meeting held Apr.17 in Doha on oil output freeze ended without an agreement. The event was attended by representatives of 17 countries. The meeting kicked off about 6.5 hours later than the fixed time.
Reportedly, the meeting was delayed as Saudi Arabia unexpectedly said it wants all OPEC countries, including Iran to participate in the output freeze. Iran wasn't represented at the meeting.
If Saudi Arabia begins increasing production, a revisit to the low $30s cannot be ruled out, according to Hansen.
He noted that in the very short term, a record long speculative position in Brent crude could have a significant negative impact on the price if events trigger a need to reduce exposure.
"We expect crude oil to be range bound between $35 and $45 this quarter, before moving higher in the second half of the year, towards $50 by the end 2016," said Hansen.
"Even if the market starts to rebalance there is still an oversupply of 100s of millions of barrels of oil in storage, which needs to be reduced," he said. "This will add to supply over the coming months, especially as the contango begins to contract."
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