Our Bold Oil Price Prediction After the May OPEC Meeting
“As expected following comments ahead of the meeting on behalf of Saudi Arabia and Russia, OPEC members have agreed to prolong the existing production curtailment (a cut of 1.8m bbl/d including Russia’s cuts) to the first quarter of 2018″.
Prior to the meeting, traders had bid up the price of oil, factoring in the possibility of additional steeper production cuts into the price of oil.
European stocks are likely to drift lower at the start of trading Friday as investors react to yesterday’s OPEC agreement on production limits and keep a stern eye on political developments in the United States.
However, OPEC and the other countries involved might not have agreed to cut production further as that could have proved beneficial for the American shale oil industry.
That, in turn, is increasing supply and keeping a lid on price gains.
“Malaysia views such steps, in the long term, would positively impact more economies for both producers and consumers alike in achieving the sustainable development agenda”.
However, the oil price fell almost 4 per cent after last week’s meeting to $51.30 for a barrel of Brent crude, the global benchmark.
According to Business Insider, with 19 straight weeks of rig additions and oil near $50 a barrel, producers are clearly more confident in market conditions than they were a year ago.
The alliance between OPEC and non-OPEC countries faces competition from US shale producers.
As the de facto leader and largest producer of OPEC, Saudi Arabia has cut its production the most of any member of the bloc.
“The negative oil reaction to a 9-month OPEC production cut extension is a prime example of “buy the rumour, sell the fact”.
Kazakhstan joined the current OPEC and non-OPEC pact last November, pledging to keep its output at around 1.7 barrels per day (bpd).
That already puts American producers in the league with oil giants Saudi Arabia and Russian Federation and cuts further into OPEC’s past ability to play a role in setting prices and supplies.
Crude oil plunged five percent following the Thursday announcement as investors were disappointed the meeting did not produce bigger supply cuts.