“The market is getting more bullish as the damage caused by the oil price crash is becoming apparent and is forcing the market to look beyond the current glut to a world with falling production”, said Phil Flynn, senior market analyst at Price Futures Group, in a note. Crude oil prices have been affected, for instance, by geopolitical developments such as the turmoil that took place in Libya at the beginning of 2011, entailing as a outcome that its price per barrel skyrocketed to above $100. The surge in oil prices helped reverse Wall Street’s early losses to turn the Dow and the S&P into positive territory.
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There is an increasing hope that members of the Organisation of Petroleum Exporting Countries (Opec) along with non-Opec producers may be moving toward a consensus to support prices in an oversupplied market.
The United Arab Emirates’ energy minister said that current prices are forcing all suppliers to freeze their production. The Kingdom’s Foreign Minister Adel al-Jubeir said on Saturday that speculation of the country cutting its production while others ramped up theirs was “not a realistic one”.
“I wouldn’t worry about that if two out of about 40 which includes non-OPEC members decides to scale out, perhaps we can still achieve the effect that we want”, Kachikwu said. If these numbers prove to be accurate, and with the market already awash in oil, it is very hard to see how oil prices can rise significantly in the short term.
In light of the considerations outlined above, it is not complicated to grasp why the low oil prices are affecting dramatically several companies (and, indirectly, banks) as well as entire countries like Russian Federation that rely heavily on revenues stemming from oil exports. To the contrary many producing assets are losing now at the current oil prices ” We are seeing a reduction and we will see a reduction in those fields”, he said.
Saudi Foreign Minister Adel al-Jubeir reiterated Saturday that Saudi Arabia is not considering an outright production cut.
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OPEC’s 13 members pumped 32.43 million barrels per day in January, about 820,000 barrels per day above the 31.61 million barrels per day average 2016 demand for its crude the organization projected in its February report. Supply and demand data for the second half of the year suggests more stock building, this time by 0.3 mb/d. Major Opec producers are now privately starting to talk about a new equilibrium of $50 a barrel, adding to signs that the market’s long, deep rout is officially over, says Gary Ross, one of the industry’s leading prognosticators.
