OPEC poised to further regulate prices amid higher output concern
Moscow. OPEC and its non-OPEC allies, all financially embattled, will continue to regulate prices, Gal Luft, the co-director of the Washington-based Institute for the Analysis of Global Security, for his part, told Trend.
“They surely realize that additional gains in oil prices will unleash a new wave of production from North American shale formations that need higher prices to become competitive. The same is true for Canada's oil sands. This can create a new glut followed by a new race to the bottom,” he said.
Oil prices started their ascent with the production curtailment by “OPEC+” in late 2016, and now seem high compared to other industrial commodities. But still the fate of the OPEC and non-OPEC production cut deal remains a key issue in the global oil market in 2018, informs Trend.
As the OPEC tries to reduce output, concern that U.S. crude production will hit new records remains on investors’ minds. Yet experts argue that, OPEC and Russia will let oil prices climb as high as the market can bear.
“So in June they [OPEC] will be extra careful and may decide against extending the cuts into 2019,” he said.
Asked about ‘dark clouds' on the horizon that could trigger severe volatility in oil prices, Luft said that in terms of supply-demand dynamics Venezuela may face a year of decision and perhaps also Libya, if elections take place in the summer.
“I'm worried about things getting out of control in the Korean Peninsula and/or a collapse of equity markets which are quite inflated at the moment. Those two scenarios can have system-wide implications including sharp fluctuations in prices,” he said.
Luft stressed that the weakness of the dollar, which the Trump administration recently announced, is quite welcomed and will also inject additional upward pressure.