Till the final decision on November 30 meeting, one could expect to find a floor for crude oil prices, said Mriganka Jaipuriyar, Associate Editorial Director, Platts.
The news that the Organisation of Petroleum Exporting Countries (OPEC) had agreed to cut production by 750,000 barrels a day, came as surprise because experts had expected no agreement to come out of the meeting in Algeria.
Mriganka Jaipuriyar, Associate Editorial Director, Platts said it is a positive that the members have agreed that there is a need for an agreement but a lot hinges on how production in Iran, Libya, Nigeria fares because they have insisted they want to raise production by a combined output of 1 million barrels per day (mbpd). However, till the final decision on November 30 meeting, one could expect to find a floor for crude oil prices.
The decision on November 30 remains key – one needs to see if there is an agreement going forward and how oil stocks are faring at that point in time.
Saudi Arabia and Russia have been pumping at record high levels and if they continue with that for the next 3-4 months then it would add to the global stock. However, if they agree to cut production in 2017 and the winter is harsh, as well as countries are down on inventories then the rebalancing of the market could happen in pulled forward than the second half of 2017, as was predicted by IEA. Once that happens, it is likely that prices could go above USD 50 a barrel.
When the members meet on November 30, a lot of factors will have to be taken into account like production levels in Libya, Nigeria etc plus the price of oil and if they are trading above USD 50/bbl and so is there a need to cut production etc.
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