Oman crude back in positive territory
After losing roughly 10 per cent of its value over the past week, the price of Oman Crude inched up a heartening 34 cents to settle at $50.41 per barrel yesterday, the Ministry of Oil & Gas revealed in an official tweet.
The modest increase — the most notable since prices began to slide in trend with international prices — has helped keep Oman Crude above the psychologically important $50 per barrel mark throughout the latest crisis.
The downtrend, triggered by an Opec report of a continuing supply glut despite last November’s global deal to cut output, lopped at least five dollars off the cost of Oman crude from a high of $55.60 per barrel that was reached on March 1, 2017.
However, a Muscat-based expert voiced hope that prices could rebound if global production cuts agreed by Opec and non-Opec countries last November will continue to be honoured.
“The slippage is linked to a buildup of US crude oil inventories,” said Dr Fabio Scacciavillani, Chief Economist of the Oman Investment Fund (OIF), a sovereign wealth fund of the Sultanate of Oman.
“The Opec and non-Opec production cuts were intended exactly to revert this process. The fact that so far it has not materialised has confused most traders. But if compliance with the agreement is enforced this slippage will turn out to be just a temporary vagary and prices should rebound,” he added in comments to the Observer.
In a report published earlier this week, Opec had revealed that oil inventories had continued to swell despite the November deal.
Along with non-Opec producers, the cartel has pledged to remove around 1.8 million barrels per day (bpd) from global production starting from January, 1, 2017. Non-Opec member Oman has slashed 45,000 bpd from its daily production as part of its commitment under the global pact.
However, in its latest monthly report, Opec warned that oil stocks in industrialised nations rose in January to stand at 278 million barrels above the five-year average. This figure included 209 million barrels of crude.
Following the publication of the report, benchmark prices fell sharply to trade close to $50 per barrel — their lowest since November. However, crude is still well above the 12-year low of $27 reached in January 2016.
Stable, if not buoyant prices, are critical to the Omani government’s goal to reduce its widening budget deficit. Earnings above $45 per barrel — the price benchmark set by the Omani government in formulating its 2017 State Budget — are being set aside to plug this deficit.