Two big pro­duc­ers just called a bot­tom for oil – US$60 a bar­rel

The Star Malaysia - StarBiz - - Foreign News -

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.

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