U.S., Russia, Iraq Must Cut Production Before OPEC Takes Output Action: FGE

by Ship & Bunker News Team
Friday March 11, 2016

Fereidun Fesharaki, founder and chairman of Facts Global Energy (FGE), told delegates at a Thomson Reuters Asia Petroleum Lunch this week what critics have been arguing for over a month now: that any cut in output is unlikely unless the Organization of the Petroleum Exporting Countries (OPEC) sees declines in the United States and other key countries.

He said, "Everybody knows at some point in time you have to cut back, but the time hasn't arrived and it is highly unlikely to be in the near future."

Fesharaki said in addition to U.S. declines, which he predicts will be at least 500,000 barrels per day (bpd) this year, OPEC wants to see a commitment to reduction in Russia and limited growth in Iraq; however, he conceded that the latter hasn't any incentive to cut back.

As for the former, he remarked, "Maybe economics and just the decline rates that you're seeing at several fields will end up reducing production by up to 200,000 bpd, to 300,000 bpd."

FGE believes demand growth for oil in 2016 will be 1.3 million bpd and year-end inventories will be half what they were in January, which for prices means that "by end-2016, it's hard to imagine the price at less than $50 a barrel."

Kokou Agbo-Bloua, global head of flow strategy and solutions at Societe Generale, recently predicted $50 will be achieved later this year and said "There is clearly room for the stabilization of the oil price at these levels and some marginal upside."

Ship & Bunker News Team
To contact the editor responsible for this story email us at editor@shipandbunker.com