Baku, Azerbaijan, Sept.27
By Leman Zeynalova – Trend:
The latest surge in oil prices marks the end of an upward trend, says an analysis done by the UK-based consulting company Capital Economics.
“The oil market has become better balanced over the past year, suggesting that prices should remain fairly stable. To recap, 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,” said the analysis obtained by Trend.
The analysts suggest that there are several reasons for the recent rise in prices.
“Most significantly, the underlying demand and supply for oil have been coming into balance over the past year or so. There has been a steady increase in demand as global growth has picked up. And the increase in supply has been constrained by the OPEC-led production cuts, for which compliance has continued to be surprisingly good,” said the company.
The analysts recall that more recently, leading OPEC members have hinted that they may extend their production cuts of 1.8 million barrels per day beyond March 2018.
“This in turn is partly a response to oil stocks not dropping back as rapidly as OPEC members had hoped, due to a surge in oil production by Nigeria, Libya and the US. We suspect that the latest surge in oil prices marks the end of an upward trend. Admittedly, some kind of deal to extend the OPEC cuts is now likely, but it is not a done deal as there are several obstacles to be overcome,” said the consulting 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.
---
Follow the author on Twitter: @Lyaman_Zeyn