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CRUDE oil prices jumped last week for the first time since last September along with the USA oil, hitting the level of $65 per barrel. This encourages USA shale producers to push for more oil production.
The average of the year will be $60, same as last year. The question is whether it will remain at the level of $60-plus next year. Oil prices rose to the current level because the trade disagreement between USA and China has cooled down, showing positive signs of global trade and growth and giving some push for oil and gas growth.
However, this may not reflect the true picture of oil market, which is awash with oil entering from all over the world. This dampens any real surge or improvements in the oil prices above and beyond the current level for next year.
The current surplus and spare crude oil capacity per day is much above five million barrels from OPEC and additional three million barrels from non-OPEC, which is free to come on stream from Brazil, Norway, Canada and Guyana and can weaken oil prices next year.
On the other hand, OPEC is committed to production cuts of more than one million barrels in order to keep the oil price at the $60 level as a minimum, since OPEC didn’t refer to any price level in their last meeting in Vienna.
As long as oil prices are within the range of $60, some OPEC members for sure will push more oils into the market, as they need every dollar they can get to balance their budget and are thus after more volumes generating cash.
For covering the basic requirements, Iraq is in need of more than $90, Iran above $150 and the rest of Gulf countries a minimum of $70. Therefore, any oil price above $60 per barrel is a blessing for the time being until the day when another source of income is discovered. This remains a part of our long-term vision.
By Kamel Al-Harami Independent Oil Analyst