OPEC: Maintaining output cut insufficient for price recovery

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ALGIERS- Maintaining the oil output cut deal, agreed by the OPEC since 2016 to stabilize the market remains insufficient for a significant recovery in oil prices, experts said Sunday in statement to APS.

 

For the economist and expert in energy questions Mustapha Mekideche, the June fall in oil prices would make it “easier” for the Organization of the Petroleum Exporting Countries (OPEC) and their partners, notably Russia, to meet on July 2nd in Vienna, to maintain the oil output cut deal.

“It was thought that the oil prices stabilization around $70 was achievable throughout 2019. This is not the case,” noted Mekideche, Vice-President of the National Economic and Social Council (CNES).

He, however, considered that maintaining the quota cut agreement was “not enough” to increase oil prices to around $ 70 a barrel, because, he said, “further uncertainties” remain.

“The renewal of the (output cut) agreement and tensions in the Middle East may push for higher crude oil prices, but, conversely, there are other market fundamentals which are likely to pull prices down,” he explained.

Among these fundamentals, the expert mentioned “the level at which will be the rise in US overproduction over the second half of 2019 and the impacts of the US-China trade dispute on global growth and therefore on the global oil demand.”

A provisional target of prices around $70 a barrel seems more “realistic” than  $80, even if it would better benefit the budget revenues of Algeria and its external balance.

In a statement to APS, Minister of Energy Mohamed Arkab had said that a $70-to-80-per-barrel price would allow the national oil company, Sonatrach, to pursue its development programs.

International expert, M’hamed Hamidouche, as for him, considers that “the news on the disagreement between Iran and Saudi Arabia create confusion about these allegedly complicated future negotiations.”

“In addition to Iran, Venezuela and Libya are excluded from this agreement and that the rest of the organization is unsurprisingly nearing to agree to extend the agreement beyond June. For the rest of the non-OPEC countries, we expect them to maintain the quotas even if the remarks of Russian Minister of Energy, Alexander Novak, seem cautious,” he argued.

Asked if the tensions in the Middle East would result in the oil prices increase, the international expert said that in case of (armed) conflict between the United States and Iran, “the prices will double within less than a month to double “.

“But from my point of view, this represents a strategy of tension pursued by the Americans as part of their economic war and the scenario that this tension leads to armed confrontation should be ruled out for now,” he added.

Other geopolitical factors may also influence prices. Those factors are related to conflicts and wars, the oil pipelines sabotage by the terrorist group ‘Boko Haram’ in Nigeria, the economic sanctions such as that the US ban on Iranian oil import, the war in Libya … etc, he explained.

Moreover, climate hazards such as storms, hurricanes and floods affecting refining centres, particularly in eastern United States, and the technical accidents such as explosions or fires in oil platforms like the North Sea, the Gulf of Mexico, Azerbaijan and many others, also have a direct impact on prices.

The environmental policies advocating the massive use of renewable energies (wind, hydro, solar, biomass and geothermal) to replace fossil and nuclear energy also impact the oil and gas markets, he concluded.

 

APS

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