Re­bound in oil if traders think car­tel cut ‘for real’

● Opec agrees to some­where be­tween 0.5 and 1.5m bar­rels a day

The Press and Journal (Moray) - - BUSINESS - BY ALLISTER THOMAS

A back­stop could be placed on the re­cent oil price freefall if traders are con­vinced Opec pro­pos­als to cut global pro­duc­tion are “for real”, ac­cord­ing to a top petroleum economist.

The car­tel yesterday agreed a cut, which will range be­tween 0.5 mil­lion and 1.5 mil­lion bar­rels per day, how­ever the ac­tual scale of it will de­pend on the out­come of dis­cus­sions with Rus­sia to­day.

Opec has been un­der pres­sure to curb pro­duc­tion, with the price of the Brent crude benchmark drop­ping more than $10 in the last month.

De-facto leader Saudi Ara­bia said a 1m bar­rel drop would be ac­cept­able.

Pro­fes­sor Alex Kemp, a petroleum economist from Aberdeen Univer­sity, be­lieves a drop in global pro­duc­tion within that range will fa­cil­i­tate a “re­bound” in the oil price.

He said: “A cut be­tween one mil­lion and 1.5m bar­rels per day would have an ef­fect on the price if the mar­ket mak­ers were sat­is­fied that they were ac­tu­ally go­ing to do it.

“If there’s some re­as­sur­ing noises from Rus­sia that they will con­trib­ute to it, that would show it is a se­ri­ous propo­si­tion.

“There would be some re­bound in the price if the mar­ket mak­ers were sat­is­fied that this is for real. It could come up by a few dol­lars.”

Opec is meet­ing in Vienna and will con­tinue talks to­mor­row along with Rus­sia and other non­mem­bers.

Pro­fes­sor Kemp be­lieves the coun­try “may well be will­ing” to as­sist, how­ever the scale of the cut re­mains to be seen.

An­a­lysts have said the 1m bar­rel fig­ure would be a “to­ken ges­ture” as the king­dom aims to bal­ance con­flict­ing mo­tives of prop­ping up prices and ap­peas­ing the US.

Pres­i­dent Don­ald Trump wants even higher oil pro­duc­tion to off­set lower pro­duc­tion from Iran, Opec’s third largest pro­ducer, due to USim­posed sanc­tions.

Jack Al­lardyce, an­a­lyst at fi­nan­cial ser­vices firm Can­tor Fitzger­ald, said: “As ever with Opec and the wider pro­ducer group, the devil will be in the de­tail in terms of over­all scale, ref­er­ence point and quo­tas.”

IN­TER­EST: Iran’s oil minister Bi­jan Nam­dar Zan­ganeh an­swers the press mem­bers’ ques­tions ahead of the 175th or­di­nary meet­ing of Opec

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