Oil prices to depend on OPEC’s further discussions
Baku, Azerbaijan, Sep. 29
By Elena Kosolapova - Trend:
Oil prices will depend on detailed arrangements of the OPEC agreement on oil production cut, Sijbren de Jong, analyst at The Hague Center for Strategic Studies and expert in energy security believes.
“Details on who will cut how much still need to be worked out, which is likely to be a tough discussion. Everybody will still look at Saudi Arabia. And Iran will not want to take a large share of the cut,” de Jong told Trend.
Yesterday OPEC agreed to cut its oil output for the first time since 2008. The group plans to reduce output to 32.5 million barrels per day from current production of 33.24 million bpd. How much each country will produce is to be decided at the next formal meeting of OPEC in November, when an invitation to join cuts could also be extended to non-OPEC countries such as Russia.
De Jong noted that immediately after the agreement there will be speculation and an increase in oil prices. But in the next few days that will taper down, he said.
“Then after that if there are detailed arrangements between countries, they will have to stick to it for quite some time. Otherwise it won't have any real effect,” the expert said.
De Jong also believes that joining of other large oil producers to this agreement depends on the detailed arrangements. Moreover he noted that the proposed quantity that would be cut is not enormous.
Meanwhile the expert believes that any price increase is beneficial to higher cost producers such as US shale.
“So it's a double edge sword for OPEC,” de Jong said.
On Wednesday evening oil prices began to rise against the background of the OPEC agreement. However, on Thursday morning prices fell slowly after yesterday's rise – the cost of the December futures for Brent crude oil was $48.51 per barrel, November futures for WTI fell to $47.03 per barrel.
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