Abu Dhabi: Oil price is expected to trade above $60 (Dh220) per barrel in the coming days due to output cut agreement between Opec (Organisation of the Petroleum Exporting Countries) and non-Opec members but rising US shale oil production could pose a threat, according to analysts.
Opec and non-Opec members led by Russia are cutting oil production by about 1.8 million barrels per day to help lower global oil inventories and support prices.
The deal which was to expire in March, has been extended until the end of 2018 at a recent meeting of the group in Vienna.
“Oil prices going forward should remain above $60 given that production curbs are taking shape,” John Sfakianakis, director of economic research at the Gulf Research Centre in Riyadh, told Gulf News, adding that the amount of oil in the market will determine oil prices over the next few quarters.
Brent crude was trading at $63.23 per barrel, down by 0.13 per cent and West Texas Intermediate is at $57.30 per barrel, up by 0.46 per cent when markets closed on Friday.
Supply disruptions in Northern Iraq in October, Canada in November and the North Sea have all together with robust demand and supported by the Opec deal to extend production cuts been supporting oil prices this quarter.
Brent crude oil surged above $65 per barrel to reach the highest since June 2015 following news that the Fortis Pipeline System, which handles more than a quarter of the North Sea production, had been shut due to the discovery of a fracture in the pipeline.
“Heading into 2018 the big unknown remains the potential growth in US shale production. US shale oil producers continue to benefit from the rally seen these past six months,” said Ole Hansen, head of commodity strategy at Saxo Bank.
According to him, monthly oil market reports from the three major oil organisations — International Energy Agency, Opec and Energy Information Administration — all maintained a steady outlook for global demand growth at close to 1.5 million barrels per day while all raising non-Opec supply to almost equal the increase in demand.
“This development, if confirmed over the coming months, could see Opec and its non-Opec friends’ efforts to balance the market being pushed further out towards 2019. And with that the increased uncertainty about whether the group will manage to stick together for as long as this is needed,” Hansen said.
In a statement last week, UAE Energy Minister Suhail Mazroui who will also be Opec’s president next year said that Opec and its non-Opec partners are committed to the agreement and will review the market fundamentals in June 2018, during the planned 174th Opec conference.
“It is therefore too early to speculate about agreement exit strategies at this time, this will be a collective discussion between Opec and its non-Opec partners at the appropriate time in the future,” Al Mazroui said.