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Oil prices will likely continue to soften from current levels

4 July 2018 13:50 (UTC+04:00)
Oil prices will likely continue to soften from current levels

By Trend

Oil prices will likely continue to soften from current levels, Sam Barden, Director of SBI Markets, an international commodity trading and advisory company, told Trend, commenting on the possible outcomes of the OPEC decision to boost crude output.

"I think that OPEC has made their decision to raise oil output only after consulting with Russia. I believe the decision is a good one, as rising oil prices is quickly translating to rising prices for consumers at the petrol pump, and there is a real risk that further rises or sustained higher prices could dampen consumer spending ability and thus actually crash economies, which would then send the oil price crashing with it," said the expert.

Barden pointed out that OPEC needs to keep enough oil flowing to take the heat out of prices to end consumers.

"We are already seeing prices in oil softening from their current position, and as speculation through the usual US and UK markets kicks in. Prices will likely continue to soften from current levels but not too far. The key for OPEC is to try and keep control of the balance in prices in the oil market with enough volatility to keep speculators and liquidity in contracts, but not too much to upset other asset markets," he believes.

The expert pointed out that any further increase in OPEC output will depend entirely on how much prices soften from current level. "If they don’t soften much, perhaps further increases will happen, if they soften too much, no more increase will happen."

The 4th OPEC and non-OPEC Ministerial Meeting was held in Vienna, Austria, on June 23, 2018. During the meeting, it was decided to boost oil production, however, the volume was not specified.

Earlier, OPEC and several other non-OPEC producers reached an agreement to extend the production deal for a further nine months. This would shift the expiration date of the agreement from March to the end of 2018. The agreement is on the same terms as those agreed in November last year.

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