Abu Dhabi: Oil prices are expected to trend lower despite output cut talks by Saudi Arabia and other countries to balance oil markets, analysts told Gulf News.
Brent, the global benchmark, was down 0.93 per cent to $59.65 (Dh219.10) per barrel while West Texas Intermediate (WTI) fell by about 1 per cent to $51.15 at around 5.44pm UAE time.
“I can’t see oil prices meaningfully venturing above $60 per barrel,” said Stephen Brennock, an oil analyst from London-based PVM Oil Associates.
“The fact is that Opec [Organisation of Petroleum Exporting Countries] needs to reduce production by almost 2 million barrels per day (bpd) from the market in order to avoid a supply imbalance in the first quarter of next year. This is unlikely to happen.”
He also said Iranian oil exports will rebound in January from the current trough after major buyers secured sanctions’ waivers from Washington.
“All in all, bullish catalysts are in short supply and any hopes for a sustained price rally appear like wishful thinking at present.”
The comments come as leaders of some of the biggest oil producers are set to meet at the G20 summit in Argentina over the weekend and possibly take a decision to cut production to balance oil markets.
Russian President Vladimir Putin indicated on Wednesday that current oil prices of around $60 a barrel are “absolutely fine” for his country, adding that Moscow is ready if needed to work with Opec on stabilising the market after the major drop in prices, Bloomberg reported.
“I expect the Saudis and Russians will meet on the sidelines at the upcoming G20 summit to discuss the production strategy of Opec and its allies,” Brennock said.
“My guess is that they will privately agree to cut production by around one million barrels per day and rubber stamp the decision at next week’s Opec meeting,” he added, noting that such a move is widely expected and therefore already priced in.
Ehsan Khoman, head of Mena Research and Strategy at MUFG Bank, expects the possibility of production cuts between 500,000 to 2 million bpd, with the dynamics between the Big 3 including the US, Russia and Saudi Arabia, as well as demand outlook for 2019 being critical factors in the decision-making process.
“We view that heading into the G20 summit, the Saudi authorities will see through US pressure and concentrate efforts on their ‘Saudi First’ policy, thus prioritising [their] domestic needs for oil prices to hover closer to its fiscal break-even price of $75 per barrel above entertaining calls from President Trump to further raise production levels.”
He expects Brent and WTI to average $72 per barrel and $62 per barrel in the current quarter, respectively.