Oil prices unlikely to touch $50 in near term

Abu Dhabi: It will be difficult for oil prices to reach $50 a barrel in the near term, analysts said, as oil producing countries gear up for next month’s crucial Doha meeting that will focus on reaching an agreement to freeze production at January levels to stabilise oil prices.

“I would think that fundamentals have to improve before $50 is reached. Oil supply needs to be lessened or erased before prices could move higher. The present bullish run to face extreme difficulty at $42 for WTI (West Texas Intermediate) and $43 for Brent,” said Daniel Ang, an Investment analyst from Singapore based Phillip Futures.

Oil prices have edged up over the past month after sliding to less than $30 per barrel in January, mainly due to oil supply disruptions in Iraq and Libya and in anticipation of a possible deal between oil-producing countries on capping production.

Brent, the global benchmark, was trading at slightly more than $40 per barrel on Thursday, down by about one per cent and WTI at around $40 per barrel, down by about 0.75 per cent.

“The prices should be dropping after rallying for the past few weeks. I continue to believe that the previous momentum was coming from technicals rather than fundamentals and would think that prices falling now is expected. Even if prices do move up, I expect heavy resistance as it tests higher,” Ang said.

On the Doha talks next month, he said there could be an agreement but this would just be a minute step towards higher prices. “At the moment, with global supply in excess and Iran increasing its production, a production freeze is not going to cut it. Thus, would think that even if an oil freeze agreement were reached, oil may not find the strength to move much higher,” he added.

Qatar’s Ministry of Energy and Industry said this week that all 13 members of Opec [Organisation of Petroleum Exporting Countries] have been invited for talks including Iran, which is trying to increase oil production and not in favour of a deal. Russia, a major oil producer, will also take part in the crucial talks.

The meeting is a follow-up to talks last month between Qatar, Russia, Saudi Arabia and Venezuela in which they first called for the output freeze.

“The reality is that the effect of such an agreement on global supply is limited, because the involved countries are already producing near record levels, and that the shale industry’s resilience and the return of Iranian and possibly Libyan oil to global markets will continue to add to the supply glut,” said Camille Accad (left), an analyst from Asiya Investments.

Oil prices have plummeted by more than 60 per cent since June 2014 due to over production and weak demand. Opec, a major oil producing group did not agree to slashing output to increase oil prices despite calls from member countries like Nigeria and Venezuela.

Russian economy minister says sees oil at around $40 in 2016

MOSCOW: Russian Economy Minister Alexei Ulyukayev said on Thursday he thought the price of oil would hover around $40 per barrel this year and that the government was likely to use that price when it came to revising the state budget. He also said he thought it likely the rouble would rise against the dollar rather than fall. — Reuters