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Oil prices unlikely to grow in short term

Oil prices unlikely to grow in short term

Almost half the world will be online by end of 2016 (23 November 2016 13:34)

Date: 3 December 2015 13:57

Baku, Azerbaijan, Dec.3

By Elena Kosolapova – Trend:

Oil prices seem to remain low in the short term, the energy issues analyst at the Brussels-based European Policy Centre Marco Giuli told Trend.

Giuli said that Saudi Arabia can claim the strategy with current production target is working in defending OPEC’s market shares and the organization will unlikely cut output production target at the meeting on Dec. 4.

He noted that if production target stays at 30 million barrels per day, this will leave several OPEC members (Algeria, Iran, Venezuela, Nigeria) disappointed, heavily impacted by low prices and at serious risk of political instability.

Giuli further spoke on the Russia's attempts to break OPEC’s unity. He said in particular that the OPEC have-nots do not have significant other options, they would be still price-takers in a price war set to continue between Saudi Arabia and Russia, with US shale capping global prices in any case.

The expert noted that oil prices in short term can be influenced mainly by Chinese manufacturing data, which went down in November, leaving to speculation whether this will be conducive to some form of fiscal stimulus by the Chinese government and US shale output.

Moreover Guili said that oil production in Iran will also have effect on the world oil prices. He noted that Iran is now offering more attractive contractual terms to oil majors in order to bring its production back to the pre-sanctions levels. The expert believes that if Iran reaches its goal, this factor could contribute to keep price expectations low.

“However, depending on pace, size and build-up of idle capacity, and Iranian comeback may also force the Saudis to compromise on output targets in the medium term,” he said.

On Dec. 2 futures for Brent oil fell below 43 dollars per barrel at the London trading floor, approaching the minimum level of the last six years.

Edited by SI

Follow the author on Twitter: @E_Kosolapova

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