Oil prices ‘unlikely to drop much further’
Crude expected to remain volatile in the coming days as Opec considers output cuts
Oil prices are expected to remain volatile in the coming days as Opec and its allies mull production cuts to balance oil markets, analysts said.
“Oil prices will remain volatile in the next few days or weeks till Opec led by Saudi Arabia agrees to cut production. However, it is unlikely that oil prices will drop further on sustained basis, that is more than few weeks,” Garbis Iradian, chief economist for Mena at Institute of International Finance (IIF) told Gulf News.
Brent plunged 6.1 per cent to a one-year low of $58.80 when markets closed on Friday. West Texas Intermediate (WTI) was down by 7.71 per cent at $50.42 per barrel. “I think eventually Brent will remain between $60 and $70 per barrel. This is the range of oil prices that is acceptable to most Opec members, Russia and the Trump administration.”
He said the recent drop was engineered by US president Donald Trump by urging Saudi Arabia to increase production in the past five months and by providing waivers for eight countries to import oil from Iran. “As a result, Iran’s exports of crude oil will remain significant at around 1.5 million barrels a day.”
Analysts also expect substantial output cut announcements from Opec and its allies when they meet in Vienna on December 6 as oil prices drop due to oversupply. “Reports have already been talking about a cut in the region of 1.5 million barrels per day,” said Ole Hansen, head of commodity strategy at Saxo Bank.
He said a combination of rising production from the three biggest producers, demand growth concerns into 2019, and Iran taking a smaller hit on its exports than was expected have turned the market upside down. “Seven consecutive weeks of selling has seen WTI collapse from a four-year high to give up half of the gains since hitting $26 per barrel some 34 months ago.”
Meanwhile, Trump celebrated lower oil prices by tweeting: “Oil prices getting lower. Great! Like a big Tax Cut for America and the World. Enjoy! $54, was just $82. Thank you to Saudi Arabia, but let’s go lower!”