Little hope for oil revival as Opec removes output target

Dubai: Oil prices are pretty much taking the path that Opec had wished for.

Brent crude fell 1.9 per cent to $43 a barrel Friday, nearing its lowest level in six years amid a supply glut, and analysts feel that these cuts may get deeper.

“The near-term outlook [is] pointing towards lower prices still, with the only consolation that hedge funds are already holding a record short position,” Ole Hansen, head of commodity strategy at Saxo Bank told Gulf News.

Analysts are predicting brent will fall to $38 per barrel next week.

On Friday, Opec decided to keep pumping about 31.5 million barrels a day (mbpd), setting aside their previous daily output target of 30mbpd. Opec will wait until June to decide on a new limit, its secretary-general Abdullah Al Badri said.

With this Hansen feels that Opec, as a provider of price stability, “died at this meeting.”

“It also shows how the Opec is really only able to control rising prices. During a price slump like the current one, its everyone for themselves with no limits on how much individual members produce,” Hansen added.

Oil has slumped 40 per cent since the Saudi-led Opec decision in November last year to maintain production and defend market share against higher-cost shale companies. In June last year, crude had traded above $100 a barrel.

However, over the longer term, Saleem Khokhar, head of equities at National Bank of Abu Dhabi’s asset management group, sees a limited downside.

“The supply-demand equation would balance out next year and we do see [the] supply side adjusting accordingly,” Khokhar said.