THE market appears to believe OPEC can and will continue to reign in production following its resolution in that regard at an Extraordinary meeting in Algiers in late September.
At the time of going to press, the price of Brent crude was sitting at US$51.46 a barrel, while the Wti was just under US$50 a barrel at US$49.36. Both prices have seen steady growth – mixed in with some profit taking–since the OPEC announcement.
The Wti price has now climbed from a US$44.65 pre the OPEC meeting, a low of US$41 in early August and 2016 bottom of around US$35 in late January.
The OPEC Conference in late September announced that the organisation will now look to maintain a production target level ranging between 32.5 and 33.0 mb/d.
OPEC said it had based that decision on an overall assessment of the global oil demand and supply balance which noted that world oil demand remains robust, while there were prospects of future supplies being negatively impacted by deep cuts in investments and massive layoffs.
The Conference, in particular, addressed the challenge of drawing down the excess stock levels in the coming quarters, and noted the drop in United States oil inventories seen in the weeks leading up to the September meeting.
The OPEC members also expressed a desire for non-OPEC countries to join the organisation in discussions on oil production levels.
The Conference has decided to establish a High Level Committee comprising representatives of Member Countries, supported by the OPEC Secretariat, to study and recommend the implementation of the production level of the Member Countries,” OPEC stated.
“Furthermore, the Committee shall develop a framework of high-level consultations between OPEC and non-OPEC oil-producing countries, including identifying risks and taking pro-active measures that would ensure a balanced oil market on a sustainable basis, to be considered at the November OPEC Conference.”
OPEC said that based on concerns of where the oil market was heading, its Member Countries will look to” conduct a serious and constructive dialogue with non-member producing countries, with the objective to stabilise the oil market and avoid the adverse impacts in the short- and medium-term.
“The Conference concurs that there is firm and common ground that continuous collaborative efforts among producers, both within and outside OPEC, would help restore the balance and sustainability in the market,” OPEC stated.
A number of analysts attending the recent SEAAOC conference Darwin suggested that a price of around $60 per barrel is achievable by late 2016 – to early 2017.