OPEC has no reason to do anything

While OPEC meeting in early June is in the center of the key upcoming oil market events, expectations for any meanengful results are very low.

Latest failure of oil producers to reach a consensus to cap oil output to stabilize the prices undermined the hopes for any success this time.

“Market expectations for a meaningful agreement from OPEC’s June meeting are likely low following April’s debacle in Doha, when eight weeks of diplomatic negotiations failed to yield an agreement to cap output at current levels,” analysts of the US JP Morgan bank said in a report, obtained by Trend.

Meanwhile, oil prices reached this week $50 a barrel, which is the highest level since the end of 2015.

Prices are going in the right direction and the expectation is that they will carry on doing so, albeit slowly, Charles Ellinas, oil market expert, executive president at Cyprus National Hydrocarbons Company (CNHC) told Trend on May 27.

In total, oil prices have increased by three percent this week.

OPEC’s, more precisely Saudi Arabia’s strategy appears to be working with non-OPEC and shale oil production going down, according to Ellinas.

“No reason to do anything,” he said.

At the same time Ellinas believes that Iran will not agree to a production freeze but may give indications that the country is prepared to do so by the next meeting.

He also mentioned that Iran has not quite reached its targeted oil production and export level.

They need to increase exports by another 400,000 barrels per day, Ellinas said.

The Islamic Republic announced in late 2015 that it would add 0.5 million barrels per day of crude oil to the production level as soon as the international sanctions on the country are eliminated and the same amount of crude oil would be added to the output level in the second half of 2016.

The country plans to increase its daily output to four million barrels till March 2017.

Iran’s oil production stood at 3.03 million barrels per day during the first quarter of 2016, showing 230,000 barrels per day increase in comparison to 2015, the US Energy Information Administration (EIA) said in a report published May 10.

Touching upon the expectations on the oil prices, Ellinas said that general indications are that prices on average will carry on going up to $50+ this year and to $60 next.

“Main reasons are that demand is higher than originally thought, non- OPEC production is going down, spare capacity is very low. Supply-demand balancing is close. But some volatility will continue, unless eventually OPEC agrees to a freeze,” Ellinas said.

Source: Trend