Americas News
OPEC Aims for $60 Per Barrel Floor for 2018 as Analyst Predicts Shift From "Rebalancing" to "Tightening"
More positive scuttlebutt about the Organization of the Petroleum Exporting Countries' (OPEC) commitment to its production cutback initiative came on Wednesday in the form of a Gulf OPEC source, who told Reuters, "OPEC is likely to stay the course for the rest of 2018; we want to see commercial stocks going down."
He added that "The feeling in OPEC is that $60 [per barrel] should be the floor for oil prices next year."
Another OPEC source told the agency that the cartel faces a likely supply drop from Venezuela next year, but that doesn't mean it will raise output elsewhere to compensate.
Dovetailing these remarks is the contention of John Kemp, senior market analyst, commodities and energy, for Reuters, who wrote that "within the next year the narrative about rebalancing is likely to be replaced by one about tightening."
He claims the rebalancing was underway even before OPEC agreed to a production cutback; it "started with an acceleration in global oil consumption, which was already evident in the first half of 2015 in response to lower prices.
"With consumption now running faster than production the market is steadily whittling away the excess inventories accumulated in 2015/2016."
Still, the remarks of unnamed sources and bullish analysis have one thing in common: they tend to downplay troubling news, and although OPEC output fell in October by an estimated 80,000 barrels per day (bpd) due to declines in exports from northern Iraq, the U.S. exported 2.13 million bpd in the week through October 27, the first time it has ever crossed the 2 million bpd mark.
This disclosure caused the market on Thursday to pull back slightly after a strong start: West Texas Intermediate crude settled up 14 cents at $54.52 per barrel after topping out at $55.22, and Brent settled up 12 cents at $61.06.
Last week, OPEC received strong support to extend its cutbacks from Total, BP, and ENI, with the latter's chief executive, Claudio Descalzi, noting that "It's not just to balance demand but also to give an assurance to all the investors."
