Oil prices fall, as skepticism looms over OPEC deal
By Nigar Abbasova
Volatility still reins in the global oil market due to controversial views about cartel’s shock agreement to limit production, with traders doubting that the step is not enough to overcome oil glut that has exceeded consumption during the past three years.
Brent crude futures were trading at $49.94 per barrel, recording a decrease of 25 cents, or 0.5 percent, while WTI crude was 26 cents or 0.5 percent down to stand at $47.98 a barrel on October 3.
The drop was triggered by fresh production highs from the Organization of the Petroleum Exporting Countries (OPEC) as rival members like Saudi Arabia, Iran and Iraq are reluctant to give away market share.
Experts said prices went down as overproduction remained in place for the time being, and because of low chances that the limit will considerably change the supply outlook as the planned intervention might not be sufficient to bring production equal to, or below, consumption.
Doubts of traders mainly connected with the fact that 14-nation OPEC’S deal, which hasn't brought a big bounce on the market, is only preliminary and provisional and needs to be finalized in Vienna in November.
OPEC hasn’t actually implemented the cuts yet, and the freeze is not at all guaranteed, while how much each country will produce is to be decided at the Vienna meeting.
Moreover, the intention of such countries as Iran, Iraq, Libya, Nigeria and others to increase output, complicates the deal even more. With Iran planning to return oil production to pre-sanctions levels and Saudi Arabia refusing to cut production, crude oil is unlikely to move higher than the $40 to $50 range in 2016, analysts say.
Goldman Sachs stated that oil barrel prices could climb between $7-10 by the end of the first half of 2017 if all members of OPEC strictly comply with their new quotas. The bank, however, mentioned that OPEC members don't always feel obliged to stay within quotas, which will contribute to the ongoing uncertainty in the "black gold" market.
Head of the Center for Energy, Natural Resources, and Geopolitics Ariel Cohen told Trend that oil prices will not stand below $45 per barrel in 2017, mentioning that the figure will not exceed $60 a barrel.
Cohen said he is skeptical about the chances of success for the freeze deal as OPEC’s consensus to limit output, which became the first since 2008 will not yield expected results.
“We have observed a 6 percent increase up to $49 per barrel of Brent, however, $2.5-3 does not decide the issue. Such “achievements” will be reduced to zero when we face violation of quotas,” he said.
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Nigar Abbasova is AzerNews’ staff journalist, follow her on Twitter: @nigyar_abbasova
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