USA oil prices rose back above $50 per barrel early Monday as top producers met in Istanbul to discuss the production cuts agreed on last month, and Saudi Arabia’s energy minister said prices could hit $60 a barrel later this year.
OPEC members agreed at the end of September to cut oil production down to a range of 32.5 and 33 million barrels per day effective from November at the informal OPEC Algeria meeting.
“Russia is ready to accede to joint measures to reduce [oil] production, and is calling on other oil exporters to do so”, said Russian President Vladimir Putin.
With benchmark Brent crude trading at about US$52 a barrel – less than half its price in mid-2014 – countries from Saudi Arabia to Russian Federation remain under severe economic pressure. Writing last week in the midst of one of the most pronounced rallies in crude oil prices for year, Antoine Halff, the director of the global oil markets research program at Columbia University, said the OPEC proposal is nothing more than a letter of intent. The global benchmark crude traded at a $1.59 premium to West Texas Intermediate for the same month. The forecast was based on the expectation that oil traders would take a more jaundiced view of the OPEC deal that came out of the recent meetings in Algiers. It was earlier reported that Iran’s crude oil exports touched a five-year high in August at 2.11 million barrels per day – up 15 per cent from its July exports. Still, the market will remain in limbo until November 30, when OPEC has it official meeting in Vienna. This is the highest level since October 9 past year.
The objectives of this decision, said the OPEC chief, “was to restore stability in the market and address the issue of high inventories”, which he put at a billion barrels, “depressing prices”.
But the fine points of the agreement – who would cut back, and by how much – were left open at the meeting in Algeria, and major non-OPEC producers such as Russian Federation were not part of the accord.
However his comments on the need for caution by OPEC may fuel suggestions that Saudi Arabia is reluctant to deviate greatly from the policy it adopted in 2014 of tolerating low prices and seeking to maintain market share. “Many companies and countries are hurting. we don’t want to give the market the wrong signal and shock the market’s prices”, he said.
The Organisation of Petroleum Exporting Countries (OPEC) lost over $1trillion in revenues from the drop in crude prices globally, the Secretary-General of the body, Mohammad Sanusi Barkindo, has said.