Two big producers just called a bottom for oil – US$60 a barrel
DUBAI: Italy’s top oil producer and Oman’s energy minister predict the latest oil rebound will stick.
Prices are up more than 20% since hitting an almost two-year low in December, enough to alter Opec+ rhetoric from reassuring investors that it will cut output to taking credit for the rebound, and in the case of Oman, forecasting where oil will trade for the year.
Oman Oil Minister Mohammed Al-Rumhi told Bloomberg TV that the agreement between the Organisation of the Petroleum Exporting Countries and partners including Russia and Oman (Opec+) can sustain prices at US$60 a barrel. He sees crude trading between that bottom and US$70 a barrel this year. Claudio Descalzi, the chief executive officer of Italy’s Eni SPA, told Bloomberg TV the range will be between US$60 and US$62 a barrel.
“I see demand for hydrocarbons still growing,” Descalzi said. “When we talk about 1.3 to 1.4 million barrels a day, that is still there,” referring to potential demand increases.
A few weeks ago, as global benchmark Brent crude briefly dipped below US$50 a barrel, Opec ministers were taking turns to remind investors that they would trim supply. That message, along with brightening prospects for US-China trade talks seem to have worked, pushing the gauge above US$60 a barrel and ending talks about an extraordinary Opec meeting.
“We only do that during emergencies, and there is no emergency,” UAE Energy Minister Suhail Al Mazrouei said in an interview on Sunday, referring to a proposed meeting he floated in December. The oil glut will be cleared in the first quarter and Opec+ remains committed to making “whatever is the right decision to balance the market.”
The volatility that became a feature in financial markets last year is expected to continue for oil in 2019. Prices could rise higher than US$60 a barrel if consumers perceive a gap between supply and demand, according to Descalzi. Ruhmi predicts even sharper swings between US$50 and US$80 a barrel during for the year.
Opec, led by Saudi Arabia, agreed to cut oil output this year to support prices. The group and its allies, known as Opec+, agreed to start cutting 1.2 million barrels of daily production this month to stem a surplus and stabilise the market. Producers already reduced output by 600,000 barrels a day in December, Saudi Arabia’s energy minister Khalid Al-Falih said on Wednesday.