OPEC Hopes Oil Production Cut Will Offset US Glut, Boost Profits
On December 30, oil prices remained comparatively high ahead of the New Year holiday with traders hoping that an agreement between members of the Organization of Petroleum Exporting Countries (OPEC) and non-OPEC members is going to be implemented in 2017.
West Texas Intermediate (WTI) crude traded at $54.02 a barrel while Brent traded at $57.18 a barrel.
Oil prices dipped on December 29 after a surprise boost in US inventories reversed an advance in prices that had pushed global crude to its highest level since July last year.
The oil production cut will be OPEC’s first since 2008. Looking forward, oil prices should gradually stabilise around mid-50 dollars per barrel.
“The recent OPEC-Russia deal should be enough to provide support for the oil price around the mid-$50s per barrel (Brent) until the early spring. After that I think we will see weaker oil through the summer, because of higher supply, before some recovery again in the autumn,” Chris Weafer, a partner at Macro-Advisory, a Moscow-based consultancy, told New Europe, adding that overall he is predicting an average oil price of $55 per barrel Brent for 2017, up from $45 per barrel in 2016.
Justin Urquhart-Stewart, Founder of London’s Seven Investment Management, told New Europe that “compared to what we have seen the last couple of years this could be the year when we see a little bit more stability. We’ve seen the price rise to a new range of 50 to 60 and at that sort of level, assuming that most of the participants in OPEC and non-OPEC stay with the deal and, of course, quite a lot of them won’t, I think there is a reasonable chance it will stay within that range because it is in everybody’s interest to do so”.