There is a supply overhang of about 200 million barrels in the market, El- Badri said at a conference in London on October. 6.
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Currently, OPEC’s quota for oil production is 30 million barrels per day. US stockpiles remain about 100 MMbbl above the five-year average and the Organization of Petroleum Exporting Countries continues to pump more than its quota.
The two main crude contracts hit a six-year low during the April-September quarter owing to a fears about an oversupply, China’s economic crisis and expectations for a U.S. interest rate rise.
Inactivity of OPEC amid the continuous oil prices fall has led to the rise of allegations about the loosing by cartel its relevance on the world oil market. Instead, its base case scenario for 2016 was $45 per barrel-a level that Birol said was stilltoo low for US shale producers to maintain current production.
“We have reduced the probability of a return to the $37-$38 area per nearby WTI”, said Jim Ritterbusch of oil consultancy Ritterbusch & Associates in North Wabash, Chicago.
“On Tuesday, the chief executive of Royal Dutch Shell PLC said he saw the first sign of a recovery in oil prices”.
Russian Federation wants higher prices through constricted production. While US production has started to decline this year, other major suppliers like Russian Federation and Saudi Arabia-OPEC’s most important member-have kept the crude taps wide open.
“Geopolitical tension created by Russia’s involvement in Syria makes cooperation with OPEC highly unlikely”, said Tamas Varga, oil analyst at London brokerage PVM Oil Associates.
Oil prices jumped more than $2 a barrel on Tuesday, breaking out of a month-long trading range on technical buying and industry talk as well as USA government data suggesting the global supply glut could be ebbing. Output climbed by 76,000 barrels a day to 9.17 million as refinery utilization dropped by 2.3 percentage points, the EIA said. “We will see a higher price again”.
Russia, one of the world’s top three oil producers, said it was prepared to meet OPEC and non-OPEC oil producers to discuss the market if such a gathering is called.
Oil continued to rally in Asia on Monday, although optimism was tempered by poor United States unemployment data.
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Geopolitical uncertainties in Iran and Syria have the potential to serve as both negative or positive catalysts for oil process in coming months.
