KUWAIT CITY, Sept 19, (KUNA): Two oil experts expected Kuwait crude prices to remain in the range of USD 50 pb in the coming few months based on the market outlook and the supply/demand mechanism.
A range of factors contributed to the rising slant in prices and stability of the oil market, foremost among which is the commitment of the major producers to the last November deal, Mohammad Al-Shatti and Dr Abdul-Samie’ Behbehani agreed Tuesday.
The deal reinstated the OPEC output cap of 32.5 million barrels per day (pbd), thus cutting the glut in production by 1.8 million bpd for six months as of Jan 1, 2017.
Members of the Organization of the Petroleum Exporting Countries (OPEC) and major producers outside the organization agreed in last May to extend the landmark deal by nine months to March 2018.
“Kuwait crude prices showed a noticeable recovery in the last three months. The prices went up from USD 44.2 pb in June to USD 45.9 pb in July and USD 48.5 pb in August,” Al-Shatti, consultant of energy economics at the Future Foresight Foundation for Consultancy and Training said in statements to KUNA.
“In early September the prices hit USD 50.5 pb, which reflects a sustained recovery based on balance in the market basics after the long slump that started in the second half of 2014,” he pointed out.
A range of positive factors contributed to the current improvement; these include the landmark agreement struck in Algeria late last year and the shift in the OPEC strategy to cooperation with non-OPEC producers. The stakeholders, whether inside or outside the organization showed high rate of commitment to their respective quotas under the deal that reached in some cased 100 percent, Al-Shatti went on.
Meanwhile, economic recovery in major oil importers, notably China and some members of the Organization for Economic Co-operation and Development (OECD), is expected to fuel demand for oil.
On his part, Chairman of Al-Sharq oil consultancy co Dr Abdul-Samie’ Behbehani said the oil market has seen unprecedented fluctuations in the last three years.
“OPEC is to blame for these fluctuations when it decided in mid-2014 to lift the cap on oil output and let the market be governed by the supply-and-demand mechanism,” he noted.
“This decision resulted in lower oil prices and decreased investment in shale oil which became a competitor to traditional energy.
“Lower prices, in turn, resulted in accumulated oil inventories which turned to be a new kind of investment in some OPEC member countries that tended to build huge facilities for storing crude oil in major oil importing countries such as China, Japan, South Korea and Singapore,” Dr Behbahani pointed out.
He noted that psychological factor affects the market particularly when mass media exaggerate the impacts of climate changes on consumption and drilling activities or data on strategic oil reserves.
Dr Behbahani projected the Brent crude prices at USD 58 pb in 2018 and USD 60 in 2019 before remarkable leap in the following year.