Oil Stable After OPEC Suggests Extraordinary Measures

Alicia Cross
October 12, 2017

"Number two, to sustain this into next year, some extraordinary measures may have to be taken in order to restore this stability on a sustainable basis going forward", the top OPEC man said without elaborating on what these measures might include, although he mentioned that OPEC would welcome more participants in the production cut deal.

"It is no secret to anyone that OPEC and US shale producers have been battling each other in a production war since the dramatic decline in the price of oil has begun three years ago; however, each party would benefit from a stronger price of oil in the medium to longer term", said Ahmad.

Opec said the world would need 33.06 million barrels per day (bpd) of its crude next year, up 230,000 bpd from its previous forecast.

Oil prices tumbled from over $100 in 2014 after OPEC nations led by Saudi Arabia cranked up production to try to push out USA shale producers which have higher production costs.

"These strong and positive signs are evidence that the fundamentals of supply and demand are gradually but steadily returning to balance", he said. But, the oil group soon moved to curb production-along with other oil producing nations-in late 2016.

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Last year, average USA oil production was 8.9 million bpd, lower than the 2015 level of 9.4 million bpd. Over the past five months, OECD commercial stocks have dropped by 130 million barrels, OPEC's Barkindo said in his speech, but noted that there was still a 171-million-barrel overhang in August.

However it doesn't see prices climbing soon.

Oil prices have been rising since the end of summer, but remain well below their 2014 level.

Oil prices also gained support by the International Monetary Fund's prediction that global economic growth is expected to be 3.6% this year and 3.7% next year.

Brent crude and West Texas Intermediate started the week with gains after yesterday OPEC's Secretary General, Mohammed Barkindo, said the cartel may have to take some "extraordinary measures" to restore the oil market stability.

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