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OPEC SEES OIL BELOW $100 A BARREL

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OPEC SEES OIL BELOW $100 A BARREL

May 12 2015, 08.35am GMT

STOCK.com

 

The Organization of the Petroleum Exporting Countries (OPEC) does not see the price of oil in the next decade consistently trading again at around $100 a barrel.

According to the cartel’s recent strategy report draft, this negative assessment might see the group considering to return to production limits in order to influence the markets again.

Given the report, which was viewed by The Wall Street Journal, the prediction is that oil prices (CLM5, +0.51%) will be around $76 a barrel by 2025 in its most positive scenario, which is an indication of OPEC’s concerns that American competition will easily cope with the reduced prices and will continue pumping out supplies. The report also considers situations where the costs of crude oil in 2025 are below $40 a barrel.

Last week, a delegate at the Vienna OPEC strategy presentation said that in none of the scenarios presented, is a price of $100 a barrel seen.

OPEC has been struggling with a response to price crashes in history caused partly by a sudden increase in American supplies, which is attributed to deep underground shale formations hydraulic fracturing. Typically, in order to reduce supplies, the cartel would cut its own production and thereby raise prices, in market turbulent times, but a year ago the group concluded that would not work.

In the bid to keep its customers, some OPEC nations, like Saudi Arabia, cut prices and flooded the market with crude. As a result, the lower price environment could purge some oils that are expensive to produce, like that from American frackers who have very high costs.

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