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Oil prices head for $60 per barrel in 2016

31 May 2016 [16:41] - TODAY.AZ

/By Azernews/

By Fatma Babayeva

Price of the black gold jumped above $50 per barrel last week on the backdrop of positive forecasts for the market.

Since the beginning of 2016, price of oil futures contracts experienced increase of 32 percent making the producers optimistic about the investments.

Cost of July futures of WTI crude in New York Mercantile Exchange (NYMEX) increased by 0.63 percent to $49.64 per barrel on May 31. In the meantime, prices of July futures of Brent benchmark stood at $49.76 per barrel in London ICE without experiencing any change compared to the previous day, according to Bloomberg Energy.

Meanwhile, price of the Azeri LT CIF produced at the Azeri-Chirag-Guneshli block of oil and gas fields reached $50.87 per barrel on May 31, Azertac reported.

OPEC’s oil basket cost $44.76 on May 27, according the organization’s official website.

Based on the current developments in the market, some analysts expect the price of oil to attain $60 or even higher rate by the end of 2016.

Although many experts believe the recent increase in oil prices to be temporary caused mostly by the disruptions in oil production of some oil producing countries like Canada, Nigeria, Venezuela and Libya, others call to attention the demand side of the issue, which also gaining strength.

“It’s possible for oil prices to reach $60 or more during this summer,” said Economy Minister of UAE, Sultan Bin Saeed Al Mansoori on May 30.

Increase in demand for oil in the U.S. is pointed as the main reason pushing up prices during this year on the background of the decline in the country’s oil stockpiles.

“Crude will end the year higher than $60 a barrel,” Mario Maratheftis, global chief economist at Standard Chartered Plc, said to Bloomberg. “SEB Bank forecast last week that Brent would touch $60 in 2016.”

“We’ve always been incredibly bullish on oil,” Maratheftis said. “We expected supply to collapse. Demand is still very strong. I would expect oil prices to keep rising,” he added.

In the near future, oil prices in the global market will increasingly depend on the situation in Libya, said Gal Luft, senior adviser to the United States Energy Security Council and co-director of the Institute for the Analysis of Global Security (IAGS) to Trend on May 27.

If the political conflict in Libya continues, there is a possibility for oil prices to trade at $60-70 range within a year, he said.

Libya, along with Iran, rejected to join oil freezing plan of OPEC which was held in Doha on April 17.

Oil freezing plan was previously designed to cap oil output of the producers at the level of January 2016 in order to shore up oil prices in the market.

Now OPEC’s upcoming meeting on June 2 is unlikely to bring any fundamental breakthrough due to geopolitical tensions among oil producing countries.

Earlier, Saudi Arabia reiterated that the country is not going to limit its production level without Iran’s commitment to the plan. Iran, in its turn, said that the Islamic Republic may only consider freezing plan after it reaches pre-sanction level of exports (2.2 million barrels a day).

What’s more, this time, Russia is not attending OPEC’s June meeting which is a sign that like many others, Russia does not believe that the cartel will be successful in realizing oil freezing plan either.

In addition, Russia’s oil production surpassed Saudi Arabia’s output in March. Russia produced almost 11 million barrels per day, Russian Federal Statistics Service Rosstat said on May 30.

According to Rosstat, Saudi Arabia produced 10,120 million barrels daily in March, compared to Russia's 10,927 million barrels.

In total, OPEC countries produced 32 million barrels a day throughout the first quarter of 2016.

According to Rosstat, over the first three months of 2016, Russia sold oil worth more than $10 billion.

The share of oil sales in Russian export made up 23 percent in the first quarter of 2016, compared to 25.2 percent in the same period of 2015.

It is very hard to predict developments in the oil market as this global commodity is not only influenced by economic but also political factors.

URL: http://www.today.az/news/business/151272.html

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