Baku, Azerbaijan, Sept.27
By Leman Zeynalova – Trend:
A significant increase in oil prices would lead to higher shale production and weaker OPEC compliance, says an analysis done by the UK-based consulting company Capital Economics.
Looking further ahead, it seems likely that oil prices will be fairly stable in the coming years, said the analysis obtained by Trend.
The price of Brent crude reached nearly $59 per barrel over the past days or so. This is its highest level since July 2015 and marks an increase of 30 percent since its recent low-point, in June.
“A significant increase in prices would lead to higher shale production and weaker OPEC compliance, and a significant decrease may well prompt OPEC to reinforce its agreement to restrict supply,” said the company.
On May 25, OPEC member countries and non-OPEC parties, Azerbaijan, Kingdom of Bahrain, Brunei Darussalam, Kazakhstan, Malaysia, Mexico, Sultanate of Oman, the Russian Federation, Republic of Sudan, and the Republic of South Sudan agreed to extend the production adjustments for a further period of nine months, with effect from July 1, 2017.
The reductions will be on the same terms as those agreed in November.
OPEC and participating non-OPEC producing countries recorded the highest conformity ever with their voluntary adjustments in production, achieving a level of 116 percent as of August 2017.
The analysts believe that oil prices around their recent range of $45-60 per barrel would probably be ideal for the world economy.
“This is high enough to avoid crises for most major producers (except Venezuela) and to justify this year’s rebound in investment, but low enough not to be a drag for consumers. Also, as we have pointed out before, the world economy should now be fairly resilient even if oil prices slumped,” said the analysis.
Capital Economics’ forecast remains for Brent crude to end this year and next at $57 per barrel and $55 per barrel respectively.
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