BUDAPEST, Hungary, October 18, 2016 /PRNewswire/ --
The fate of the oil market is not decided
yet, warns Innovative Securities'
new analyses which was made after OPEC (and
Russia) announced
it would cap daily oil production
between 32.5-33 million barrels. The freeze is
planned from November and would be a great step back
from the 33.24 million barrels of today. But these decisions
are not definitive yet, underlines the company.
Innovative Securities reminds that it is hard to reach an
agreement inside (and outside) the OPEC, and there were several
instances when announcements remained just that, announcements.
What makes the situation more interesting, they add, is that days
later Russian president joined the emerging pact. One thing is for
sure, believes Innovative Securities, "The freeze of production
came unexpected as the price of WTI crude jumped from $44 to $51 in two weeks".
They see signs for a protracted debate: "In the last years
Saudi-Arabia and (the non-OPEC
member) Russia revved up its oil
production to keep or grow its market share. They produced 10.5-11
million barrels each". In the meanwhile, Iran just returned to the global market this
year and plans to reach 4 million barrels per day, instead of 3.2
million. Nigeria and Libya also tries to raise production. In a
situation like this, it is hard to see who would give up its
production for the benefit of others, they conclude.
"With a compromise and a price around $60, the balance between supply and demand would
be easier to reach", believes the company, adding: "this would be
good for most oil producing countries and would give a boost to the
global economy and inflation". Namely, they add, even the low oil
prices could not get a boost for consumer spending while oil
companies have postponed investments totalling up to $500 billion. A higher oil price (above
$50) might also be a reason for the
US to restart shale oil production which would raise supply.
OPEC, however, did not cut back its production in 8 years so
some are sceptic this time too, underlines Innovative Securities.
If they do reach an agreement that would easily raise the prices to
$60-70. "On the other hand, if OPEC
fails again, after a fast disillusion prices would fall under
$40 and the general optimism would
end for a while", concludes the analysis.
For more information:
Innovative Securities Web
Innovative Securities News