Oil age ending, reorientation requires money

It is senseless to expect the OPEC member-states to make decisions at a meeting in June, which may have an impact on oil prices, said Oleg Anashkin, PhD, research fellow of the Russian National Research University “Higher School of Economics”.

Anashkin was commenting on the OPEC’s upcoming meeting, to be held in Vienna on June 2.

“Each member-state will act independently irrespective of joint decisions, declarations,” Anashkin told Trend via e-mail May 27.

A glut in crude oil supply has been the main reason for drop in oil prices for the last few years.

OPEC, always acting as the main regulator of oil prices, has not resolved this problem yet.

The expert said that the leading players on the oil market are beginning to realize that the age of oil is gradually ending.

“This means that it is necessary to find a method to shift to the next technological way,” Anashkin said, adding that any reorientation requires a lot of money.

The expert said that money can be obtained, for example, by agreeing with everybody about the reduction of production to increase the oil price and then sell it at the maximum price.

Therefore, the expert thinks that the largest oil producer – Saudi Arabia will only increase production, trying as soon as possible to get the maximum income that will allow the country to start global restructuring of its economy.

Oil producers could not agree on freezing of an oil production level to stabilize the market at the meeting in Doha in April. The main reason was the unwillingness, in particular, Iran’s unwillingness, to participate in the project because of its own plans to increase oil production up to a pre-sanction level. Despite a failure during Doha’s meeting, the prices began to increase in April. Brent oil price exceeded $40 per barrel April 8 compared to $37 a day earlier.

For the first time in 2016, Brent oil price has exceeded $50 per barrel this week. The average price is kept at the level of $46 per barrel in May, which is almost $5 more than the average price in April. JP Morgan predicts Brent oil average price at $45.3 per barrel in 2016, while Citigroup – $50 per barrel in the third quarter.

Source: Trend