Does Opec Have A Strategy For ‘Lower For Ever’?

20 Oct 2017 Issue: 60 / 42

Oil majors are expecting, indeed embracing, a ‘lower for longer’ or ‘lower for ever’ oil price world. But, with ‘peak demand’ on the horizon, Opec risks getting trapped in a cycle where ‘lower for ever’ refers to output as well as price.

The consensus from this year’s Oil & Money conference in London is that oil prices are likely to fluctuate around a $55-60/B band for some time to come. Approach $60/B for WTI (around the low $60s for Brent based on expectations of the North Sea grade’s premium narrowing from current levels) and US shale investment will leap, whilst Opec is widely expected to defend a floor of $50/B or so.

Opec is in a self-congratulatory mood. The organization’s Secretary General Mohammad Barkindo used his keynote Oil & Money speech to laud “cooperation unparalleled in the history of the industry.” Thanks to the “historic” November 2016 deal between Opec and 10 non-Opec countries (Equatorial Guinea was admitted into Opec in May) to cut output “there is no doubt that the market is rebalancing at an accelerating pace” he says. (CONTINUED - 2351 WORDS)