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World oil prices above $30
At a time when brokerage firms are betting crude as low as $10-20 a barrel, the oil prices rose above $30 a barrel on Tuesday. The rise in the price buoyed by hopes that OPEC and non OPEC producers may reach a deal to tackle one of the biggest supply gluts in decades.
Rising hopes of OPEC deal to tackle glut
London/Mumbai/Hyderabad: At a time when brokerage firms are betting crude as low as $10-20 a barrel, the oil prices rose above $30 a barrel on Tuesday. The rise in the price buoyed by hopes that OPEC and non OPEC producers may reach a deal to tackle one of the biggest supply gluts in decades.
Reuters reported that the OPEC is attempting to cut supply even from rival producers, quoting Iraqi Oil Minister Adel Abdel Mahdi that he saw “some flexibility” for a deal. Brent crude was up 37 cents to $30.87 a barrel, rebounding from an earlier decline. It reached $27.10, its lowest since November 2003, on January 20. Also, US crude was up 34 cents at $30.68.
Oil brokers said that the demand concerns limited the rally, as China’s annual rail freight volume fell 11.9% in 2015, as against a drop of 3.9% in 2014. This added to the worries as the contracting economic activity in China.
Interestingly, the supply troubles apart, the major oil producers Kuwait, Saudi Arabia and Iraq are planning to invest in energy projects, while investors are watching the US Fed policy meet. Meanwhile, the British brokerage HSBC hinted a tad optimistic view though pegged down the average crude price at #45 a barrel for 2016 from $60.
The report is based on Brent prices, which used to be the traditional price benchmark for Indian crude basket. But more and more domestic companies are now buying from Dubai as it is cheaper than the Brent prices by $2-3 a barrel.
Though, the incremental oil demand growth remains relatively robust, estimated at over 1 mn bpd in 2015 and in 2016, but the report felt it was not enough to drain the surplus.
Even the World Bank has lowered its 2016 forecast for crude oil prices to $37 per barrel, which is higher than the present price, in its latest Commodity Markets Outlook report from $51 per barrel in its October projections.
Oil prices fell by 47% in 2015 and are expected to decline, on an annual average, by another 27% in 2016. However, from their current lows, a gradual recovery in oil prices is expected over the course of the year, for several reasons, said the report.
The report took the premise that the sharp oil price drop in early 2016 does not appear fully warranted by fundamental drivers of demand and supply, the oil producers are expected to sustain persistent losses and cut production, and demand is expected to strengthen due to pickup in global growth.(With inputs from Agencies)
