Abu Dhabi: Opec (Organisation of the Petroleum Exporting Countries) production cuts and geopolitical tensions in the Middle East continue to support oil prices with global benchmark trading above $65 (Dh238.55) per barrel when markets closed on Friday. However, oil is expected to ease towards the high $50s per barrel in the first quarter of 2018, according to an analyst.
Brent, the global benchmark, was trading at $65.25 per barrel, up by 0.54 per cent and West Texas Intermediate settled 0.19 per cent higher at $58.47 per barrel when markets closed on Friday.
“The current oil price rally is unlikely to be sustained, it is a result of geopolitical tension including Iraq-Kurdistan, Libya, Nigeria and fears of US sanctions on Iran and the Forties pipeline shutdown,” Spencer Welch, director, oil markets and downstream at IHS Markit in London, told Gulf News by email.
Fortis Pipeline System, which handles more than a quarter of the North Sea production, had been shut earlier this month due to the discovery of a fracture in the pipeline. Brent crude oil surged above $65 per barrel to reach the highest since June 2015 following the news.
Asked whether there would be any change on the productions cuts strategy by Opec and non-Opec members, he said it is unlikely but not impossible.
“It all depends on whether the Opec, non-Opec supply cutters stick out the deal until oil inventories get back down to 5-year average levels, we do not expect this to happen in 2018 but they could choose to still end the deal early,” Welch said.
“Russia in particular is concerned about the oil market ‘over-heating’ and providing too much stimulation to US tight oil production, which is starting to take away market share from the supply cutting alliance.”
Opec and non-Opec members led by Russia are cutting production by about 1.8 million barrels per day to lower global oil inventories and help support oil prices. The deal will expire at the end of 2018.
