Kuwait says oil market approaching stability

*
An oil tanker is seen at sunset anchored off the Fos-Lavera oil hub near Marseille, France (file). A Reuters survey of 44 economists and analysts forecast Brent crude to average $72.87 a barrel in 2018, 29 cents higher than the $72.58 projected in the previous month’s poll and above the $71.68 average so far this year.

 

Kuwait’s oil minister said yesterday that the global oil market was approaching stability based on current production levels after the recent Opec and non-Opec agreement to boost output. “It is clear today based on the current level of production that we are approaching a very stable stage…whether for the consumers or the producers,” Bakhit al-Rashidi told reporters. Kuwait has raised its oil output under June’s agreement among the Organization of the Petroleum Exporting Countries and is pumping 2.8mn bpd, al-Rashidi said, adding that the country’s production capacity is 3.1mn bpd.

An upcoming joint Opec and non-Opec committee meeting in Algeria, set for September 22-23, will review producers’ oil supply levels after Opec and others led by Russia agreed in June to raise output to cool the market, the minister said. Opec and non-Opec said they would raise supply by returning to 100% compliance with previously agreed output cuts, after months of underproduction.
That would mean a roughly 1mn bpd increase in output. Last month, Brent crude prices fell more than 6% and US crude slumped about 7%, the biggest monthly declines for both benchmarks since July 2016. Al-Rashidi said he hoped oil production from the Neutral Zone, which Kuwait shares with Saudi Arabia, would resume “very soon”.

Oil prices are likely to hold fairly steady this year and next as increased output from Opec and the US meets growing demand led by Asia and helps to offset supply disruptions from Iran and elsewhere, a Reuters poll showed on Tuesday. A survey of 44 economists and analysts forecast Brent crude to average $72.87 a barrel in 2018, 29 cents higher than the $72.58 projected in the previous month’s poll and above the $71.68 average so far this year. US crude futures were seen averaging $67.32 a barrel in 2018, compared with $66.79 forecast last month and an average of $66.16 until now.

This is the 10th consecutive month in which analysts have raised their oil price forecasts. “We expect prices will largely remain range-bound in the second half of 2018 and 2019. On the one hand, robust US shale production and market concerns over the brewing US-China trade war will help keep a lid on prices,” said Cailin Birch, an analyst at the Economist Intelligence Unit. “On the other hand, the recent decline in global stocks will make prices more sensitive to any geopolitical risk, which will keep prices from falling significantly below current levels.”

The Organization of the Petroleum Exporting Countries (Opec) and non-Opec countries agreed to raise supply in a meeting last month to meet rising global demand, but the group did not specify a clear target for the output increase. Meanwhile, US sanctions on Iran that will come into force later this year will force a decline in exports and help support prices, analysts said. “The disruption to Iranian barrels will weigh on oil markets in the second half of 2018 and H1 2019 as there are few spare barrels in the market that can offset a big disruption to Iranian supplies,” said Emirates NBD commodities analyst Edward Bell.

Sources and photo-credits: Bloomberg, Gulf Times