Expert: no conditions for oil price bouncing back to $100/barrel

Expert: no conditions for oil price bouncing back to $100/barrel

Baku, Azerbaijan, April 21

By Elena Kosolapova - Trend:

There are no conditions to restore oil prices at their previous level of $ 100 per barrel or more in the short and medium term, Anton Soroko, analyst of Russia's Finam Investment Holding told Trend April 21.

"A qualitative breakthrough in the global GDP growth rates and the expansion of oil consumption are required to increase the oil prices up to $100-120 per barrel.

"We have not seen such preconditions yet," he said. "At the same time, oil prices will continue restoring slowly. They will reach $70-80 per barrel by late 2015 and early 2016."

Soroko said that the oil prices approximately $50-60 per barrel are not very interesting for manufacturers of highly viscous and hard-to-reach oil, shale oil.

"This reduces investments in the largest companies," he said. "In particular, the number of drilling rigs in the US, working on oil shale, is being reduced."

"In the long term - during 3-5 years - this will definitely affect the oil supply on the world market and accordingly, it will positively affect the prices," said the expert.

The dynamics of the oil production in the US, the way it will change, the number of shale oil producing companies which will go bankrupt, the future of the commercial reserves will have a big impact on the oil prices, according to the expert.

Moreover, the growth rate of China's economy, the main forecasted global oil and gas consumer for the coming decades, is a very important indicator, he said, adding that the growth dynamics of the world GDP is also important.

"The slowdown in global GDP growth will have a negative impact on the dynamics of prices," the expert said.

As for the OPEC countries, Soroko believes that despite their desire to strengthen market positions through the leaving of a number of shale oil producers, the low oil prices for a long time are also disadvantageous for them, since most of these countries rely largely on the oil and gas revenues while forming local budgets.

Therefore, as he said, in the issue of oil production quotas, OPEC will become more loyal.

"In general, OPEC's decision to reduce production quotas will depend on the future oil prices," said Soroko.

"If prices rise to the level of $65-$70 per barrel, it probably will not be necessary to reduce the quota," said Soroko. "But if they start to fall again to $50 per barrel, then there is a possibility to reduce quota."

Currently, OPEC controls 40 percent of world oil supplies.

Oil rates have decreased by almost half since summer of 2014 - from $110 to around $59 per barrel of Brent oil. At the same time, the cost of a barrel of Brent oil already approached $45 in 2015. Analysts attribute the collapse of oil prices to its excess on the market.

Edited by SI

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Follow the author on Twitter: @E_Kosolapova

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