OPEC Raises Hope On Oil Price Hike

The Organisation of Petroleum Exporting Countries (OPEC), yesterday, raised new hope that crude oil prices would soon ramp up, just as it also revised upward its growth forecast for global oil demand in 2015.
The oil cartel further maintained projected record levels of world consumption for 2016, despite turbulent market conditions spurred by financial instability in Greece and China.
In its August monthly report, OPEC said it was expecting world oil demand to grow by 1.38 million barrels per day, representing approximately 90,000 more than announced in its July estimates.
The cartel also stuck to last month’s prognosis that demand growth in 2016 would reach 1.34 million barrels per day, thanks to global GDP expansion set to reach 3.5 per cent, up from 3.2 per cent this year.
“Given the better-than-expected growth in global oil demand so far this year, together with some signs of a pickup in the economies of the major consuming countries, crude oil demand in the coming months should continue to improve and, thus, gradually reduce the imbalance in oil supply-demand fundamentals,” OPEC noted in its latest report.
Oil prices collapsed 60 per cent between last June and January, hitting a low of $45. This was due in part to a supply glut caused by the boom in US shale oil.
But OPEC, which has traditionally defended price levels by cutting output when necessary, dramatically switched strategy last November when it opted to leave its production target unchanged.
OPEC has since stuck to this strategy, keeping its output target level at 30 million barrels per day.
On Monday, the World Bank warned that the lifting of sanctions related to Iran’s nuclear programme would have a “significant impact” on the world oil market in 2016.
Iran’s return to the global market would eventually add about a million barrels of oil a day, lowering prices by $10 per barrel, the bank said.
Oil markets have also been shaken by China’s reduced economic growth and collapsing stock market.
As a result of losses “triggered by China’s stock market slump” and global supply glut, US crude prices posted their biggest monthly drop since the 2008 financial crisis, with Texas light sweet declining to $47.12 per barrel on July 31.
Meanwhile, general expectations for Europe’s oil demand during 2015 have improved since OPEC’s last monthly report, but remain “coupled with large uncertainties” over the region’s economic developments, particularly in Greece, the cartel said.