Global oil prices will not remain at the current level, around $30 a barrel, for long, Charles Ellinas, oil market expert, Executive President, Cyprus National Hydrocarbons Company (CNHC) believes.
“It is an over-reaction to recent developments coupled with trader speculation,” Ellinas told Trend.
“Iran will not ramp up its production as fast as many suggested and US shale oil production is already on a downward trend,” he added.
Iran following the removal of the sanctions against the country plan to increase its current oil export of one million barrels per day by 500,000 barrels. The figure is aimed to be raised by another 500,000, to two million barrels per day within a six-month period at the next step. Iran’s current oil production is estimated to be around 2.8 million barrels per day.
The US crude oil production is projected to average 8.7 million barrels per day in 2016 and 8.5 million barrels per day in 2017.
Ellinas said that the current oil prices are hurting many countries now. “There is not much of a choice but to carry on,” he said.
“However, some recovery is on the way. Already the OPEC Secretary-General is calling non-OPEC and OPEC members to cooperate in addressing the depressed oil market,” Ellinas said.
He expects that by the middle of the year we will be back to around $50 a barrel.
Oil prices fell on Wednesday on bigger U.S. crude inventories. Brent crude oil prices moved lower by about one percent to start trading in New York at $31.49 per barrel. West Texas Intermediate, the U.S. benchmark for crude oil prices, was down roughly 2.4 percent to start the day at $30.71 per barrel.
The World Bank has recently lowered its 2016 forecast for oil prices to $37 per barrel from $51 per barrel. The lower forecast of the bank reflects a number of supply and demand factors. These include sooner-than-anticipated resumption of exports by Iran, greater resilience in U.S. production due to cost cuts and efficiency gains, a mild winter in the Northern Hemisphere, and weak growth prospects in major emerging market economies.
Earlier this week OPEC Secretary-General Abdullah al-Badri said it is vital the oil market addresses the issue of the stock overhang, and once this overhang starts falling then prices start to rise. “Given how this developed, it should be viewed as something OPEC and non-OPEC tackle together,” al-Badri said.