A rally in the oil PRICE will not extend much further and will be capped in the low $50s, say analysts. Dennis Gartman, who writes the daily financial trading commentary The Gartman Letter, told CNBC US benchmark West Texas Intermediate will be “hard to push much past $52 a barrel”. The US oil PRICE has been above $51 already in the past week and advanced close to 15 per cent. However, it dipped last night and was flat at $50.90 a barrel this morning.
Its global counterpart, Brent crude, which set PRICES for oil extracted in the North Sea, was down 0.1 per cent at around $53.90 this morning. Gartman also cast doubts on the Opec deal to cut collective output to 32.5 million barrels a day from January, saying it was very likely the cartel would not comply with, or would “cheat” on, its pledge. He also suggested non-Opec states would not hold up their end of the BARGAIN- cuts of 600,000 barrels a day – and that a rise in US shale production would offset reductions elsewhere.
Nick Cunningham, on Oilprice.com, also highlighted the pessimism that is mounting among analysts. He said Russia had increased its EXPORTS by 500,000 to 11.2 million barrels a day since August, making “its cuts of 300,000 barrels per day seem much less impressive”, while Opec production soared to 34.2 million barrels last month, “meaning it now has to cut 1.7 million barrels per day, not just the 1.2 million barrels that it announced last week”.
Several Opec members are excluded from making reductions altogether, he added, and the group “did not discuss this contingency – who should cut even deeper”. Moreover, the promise is “contingent” on those falls in non-Opec production and even ignoring Russia’s gaming of its numbers, there is little enthusiasm from its rivals to join the DEAL. “So far, four countries are set to attend [a meeting at the weekend]… although 14 were invited,” said Cunningham: Russia, Oman, Bahrain and Azerbaijan.
Despite all these concerns, few see prices falling back. BMI Research told CNBC: “The average annual oil PRICE will be higher in 2017 than in 2016, with Brent at $55 per barrel for the year.”