Oil could hit $60 a barrel by the year end if the OPEC pact to curb oil output is extended, a leading market analyst has claimed
Sam Wahab, director for oil and gas research at investment bank Cantor Fitzgerald Europe, made the comment ahead of the cartel meeting later this week to discuss whether the six month cuts implemented at the start of the year should be deepened and extended.
It was hoped that by curbing output across OPEC nations, with the support of other major producers such as Russia, the oil price could be rallied back up to more profitable levels.
In recent weeks several countries including Saudi Arabia and Russia have come out in support of extending the cuts in 2018 to support of market rebalancing.
And Wahab said that getting the oil price up to a higher cost per barrel would be critical for the Saudis’, who plan to make an initial public offering on their state run energy giant Aramco.
The only factor that could derail a market rebalance, according to Wahab, is rising US production.
He said: “We had anticipated an extension to the supply cut to be announced at this week’s OPEC meeting – at least until the end of the year. The comments made recently have clearly had an additional boost to the futures market.
“There seems to be a little resistance on the price at US$55/bbl, however if OPEC members and a selection of non-OPEC members, notably Russia, abide by the supply cut, the price could conceivably hit US$60/bbl by year end.
“It’s also worth noting that the Saudi’s are in the process of listing Aramco, and therefore will require a stable oil price to support their $2trillion valuation of the company, and so it is in their interests to continue with a production cut to do so.
“The key risk to the downside continues to stem from growing US production, which threatens to replace the cut in supply from Saudi/Russia. A further nine US oil rigs were added last week, bringing the total count up to 712, the most since April 2015, and it is very likely this trend will continue at current oil prices.”
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