Abu Dhabi: The United Arab Emirates’s economy minister joined forecasters looking for $60 crude this year with demand and production moving more in line.
"It’s possible for oil prices to reach $60 or more during this summer" as demand increases in the US, UAE Economy Minister Sultan Bin Saeed Al Mansoori said at a conference in Abu Dhabi on Monday. Crude will end the year higher than $60 a barrel, Mario Maratheftis, global chief economist at Standard Chartered, said on Bloomberg TV. SEB Bank forecast last week that Brent would touch $60 at times in 2016.
Oil futures jumped 31 per cent this year, climbing above $50 a barrel last week, as US crude stockpiles declined, trimming a glut. Robust demand in India and other emerging nations led the International Energy Agency in May to reduce its estimate of the global oil surplus for the first half. Brent last traded above $60 in July.
“We’ve always been incredibly bullish on oil,” Maratheftis said. “We expected supply to collapse. Demand is still very strong. I would expect oil prices to keep rising.”
Brent for July settlement fell 0.3 per cent to $49.15 a barrel by 2:25pm in Dubai, after trading at $50.51 last Thursday.
Meanwhile, Opec members gathering in Vienna June 2 are expected to go along with a Saudi Arabia-led policy focused on squeezing out rivals amid signs the strategy is working. That means the meeting may be less fraught than the previous summit in December, which ended with public criticism of the Saudi position from Venezuela and Iran.
By allowing prices to fall, high-cost producers are being forced out, easing the supply glut and spurring a rally of 80 per cent since January to about $50 a barrel. All but one of 27 analysts surveyed by Bloomberg said the Organisation of Petroleum Exporting Countries (Opec) will stick with the strategy. An alternative proposal — to freeze output — was finally rejected in Doha last month.
The group may also choose a secretary-general to replace Abdalla El Badri, whose term has been extended after members failed to agree on a successor. In recent months, three new hopefuls have emerged to try and break the impasse: Nigeria’s Mohammed Barkindo, Indonesia’s Mahendra Siregar and Venezuela’s Ali Rodriguez.
Following are the latest comments from Opec members and analysts. The respective shares of supply are based on April levels. The estimates for the price each member needs to balance its budget are from the International Monetary Fund unless stated otherwise.
The price needed is $87.6 for Algeria which has 3.3 per cent share of Opec production. Algeria tried, and failed, last year to organise a meeting of non-Opec/Opec members to push for output cuts, as years of declining crude production and low prices weighed on its fiscal deficit.
A freeze by producers is needed immediately to stabilise prices, Salah Khebri, minister of energy and mines, said in an interview mid-May. "Our main message to the next Opec meeting is that it needs to restore unity and work for the benefit of all members collectively,” he said.
The price needed is $93.14 (RBC Capital Markets) for Angola which has 5.4 per cent share of Opec production. Angola is seeking an International Monetary Fund (IMF) loan as state revenue plunges. Its over-reliance on strong oil prices leaves savings and levels of inward investment ‘‘highly vulnerable’’ to swings in the global economy, Fitch unit BMI Research said in e-mailed report.
The price needed is $75.16 (RBC Capital Markets) for Ecuador which has 1.7 per cent share of Opec production. Ecuador supported an oil-output freeze at the Doha meeting. Minister Jose Icaza met with his Venezuelan counterpart before the summit to discuss prices and seek to agree on a unified position. Icaza became Ecuador’s new oil minister in early May following the resignation of Carlos Pareja.
Unlike other Opec members, Indonesia is still a net oil importer so the fiscal break-even concept is not applicable. Its share of Opec production is 2.2 per cent.
Indonesia rejoined Opec at the December 4 meeting, seven years after suspending its membership. It will stick to its plan to increase oil output this year even if some of the world’s biggest producers move to cap production, Energy and Mineral Resources Minister Sudirman Said said in February.
The price needed is $61.50 for Iran which has 11 per cent share of Opec production. Iran is rebuilding its energy industry and restoring crude sales after the lifting of international restrictions in January. Exports are already at 2 million barrels a day, just short of pre-sanctions levels, the IEA said in a recent monthly oil market report. The head of the state oil company said the country — a key advocate of output restraint in previous years — has no plans to join any output freeze as it remains focused on restoring exports.
The price needed is $59.70 for Iraq which has 13 per cent share of Opec production. Iran’s production has jumped more than 40 per cent since mid-2014 and exports are at near-record levels. But plunging government revenue is hampering the state’s ability to invest, and Opec’s second-biggest crude producer is reaching the limits of its capacity to store and export oil, according to analysts at Energy Aspects and FGE. Oil Minister Adel Abdul Mahdi resigned in February amid ongoing political turmoil, his duties are being carried out by Fayyad Al-Nima.
The price needed is $52.10 for Kuwait which has 8.7 per cent share of Opec production. Kuwait plans to boost oil production to more than 3 million barrels a day within months, doubling output from where it stood during April’s oil-worker strike. Kuwait’s acting Oil Minister Anas Al Saleh, said on May 18 that Opec’s policy "has been working well.”
The price needed is $195.20 for Libya which has 0.9 per cent share of Opec production. Competing administrations of Libya’s state-run National Oil Corp. in the east and west of the divided country agreed May 17 to resume exports from Hariga port to help revive production, which has dropped 80 per cent since the 2011 uprising that ousted Muammar Qaddafi. It isn’t clear if it will send anyone to the meeting; it didn’t attend the Doha freeze talks in April.
The price needed is $104.49 for Kuwait which has 5.1 per cent share of Opec production. A resurgence in militant attacks in Nigeria’s oil-producing region has cut output to the lowest in 27 years, helping buoy global prices. An armed group calling itself the Niger Delta Avengers has warned of more attacks to come.
The price needed is $52.40 for Qatar which has 2 per cent share of Opec production. Mohammed Al Sada, Qatar’s minister of energy and industry who is also president of Opec, said global demand is catching up with supply and the market should see a "rebalancing” in the second half of the year as cheaper crude has forced some production to close. Qatar is expected to swing into a budget deficit this year, according to the IMF.
The price needed is $66.70 for Saudi Arabia which has 31 per cent share of Opec production. Saudi Arabia will probably keep producing crude at near-record levels under new Energy Minister Khalid Al Falih. Al Falih’s appointment points to an "exceedingly high probability that there will be no Saudi agreement to freeze let alone cut production,” analysts including Ed Morse said in an e-mailed note dated May 9.
United Arab Emirates
The price needed is $71.80 for the UAE which has 8.9 per cent share of Opec production. UAE still supports stability in the oil market, said Matar Al Neyadi, the undersecretary of the energy ministry.
The price needed is $121.06 for Venezuela which has 7.4 per cent share of Opec production. Venezuela is one of the so-called Fragile Five Opec members most at risk from significant instability amid the turmoil in prices, according to RBC Capital Markets.
Energy Minister Eulogio Del Pino was one of the most ardent advocates of the failed production-freeze agreement. While the country’s economy remains in critical condition, Caracas is probably resigned to the course set by Riyadh, said Jason Bordoff, director of the Center on Global Energy Policy at Columbia University in New York.