OPEC targets USD 55 per barrel
LONDON, October 6, 2016 – OPEC announced Thursday it aims to get the oil price to USD 55 per barrel by cutting production. This comes after the cartel announced September 28 its plans to cut production by between 240,000 and 740,000 bpd to 32.5 billion-33 billion bpd.
However, analysts are doubtful that OPEC’s project will succeed.
Fereidun Fesharaki, founder and chairman of energy consultant group FGE, told Bloomberg TV he thinks the agreement is “low on substance but great on public relations.” He cited the fact that most OPEC producers, except for Nigeria and Libya, are pumping at maximum levels and are unlikely to be able to cut production, which is therefore set to decline anyway. The agreement gives OPEC the credit for production cuts and any subsequent price increase, Fesharaki argues.
Markets will receive news of planned cuts positively, and Fesharaki predicts the price to go above USD 50 a barrel and “stay there” until the next OPEC meeting in Vienna. The group is expected to decide final details of the agreement at the meeting.
Major independent oil trader Gunvor Group also expressed doubts about the likelihood of OPEC achieving its goal of further production cuts. At a press conference in Vienna, the trader announced it expected the oil price to hover just above USD 50 a barrel until at least Q2 2017, also citing doubts about OPEC’s ability to curb output.