Dubai: Oil at $50 (Dh183.65) per barrel mark presents a difficult choice for producers.
Last week, Brent prices hit their highest level in a few months to breach the keenly watched $50 mark, gaining more than 80 per cent after falling to a 12-year low in mid-January.
But analysts are unconvinced that Brent crude prices can sustain the psychological mark.
“I’m not certain that we would see sustained level of $50 and above, looking at the main thing that markets would be focusing the Opec meeting,” Edward Bell, commodities analyst with Emirates NBD told Gulf News.
Opec producers, including Saudi Arabia and UAE, which corner about 80 per cent of the crude reserves, will meet on June 2 in Vienna where it is hoped a deal on reducing production can be reached.
But chances are slim, after a little headway in Doha, when Saudi Arabia and Iran failed to reach an agreement regarding a production freeze.
Correction
Supply disruptions in Nigeria, Canada and Venezuela were enough to trigger a recovery in prices to a seven-month high, but analysts have branded these outages as temporary. They added that prices cannot hold the above-$50 per barrel momentum for long once the outages are addressed.
“We do not think now that we have much room left for upside for this year. The price can hit the target of $55 dollar in the coming months but anything above that may call for price correction,” said Naeem Aslam, chief market analyst with Think Forex, in an emailed response.
Analysts feel that members will continue with their strategy to maximise market share, and temper any recovery in oil prices. as they would run the risk of getting shale producers back in the market.
“They run a risk that these higher prices could see oil production among high-cost producers stabilise and potentially begin to come back,” Ole Hansen, head of commodity strategy at Saxo Bank said.
Meanwhile, funds increased bullish bets on both crude oils by 75 million barrels during the week ended May 17, even as the combined long of 650 million barrels that these investors now own is not far from the record seen back in April.
