Global oil markets may tighten in the second half of next year as long as demand remains strong and OPEC and its partners in the production cut agreement extend it, the head of the International Energy Agency Fatih Birol told Reuters on the sidelines of an energy industry event in Norway.
“It’s up to OPEC countries to decide what are they going to do, but what we see is that the market is already on its way towards rebalancing… Therefore the price (of oil) that we have today, above $60, is a good number for most oil investments to be profitable,” Birol said, reinforcing an already strong market sentiment that the Vienna Club meeting this Thursday will set the course of international oil prices for at least the next 12 months.
Oil prices have been falling since the beginning of the week as doubts mount about Russia’s willingness to extend the production cuts by nine months instead of six, and after TransCanada announced that it is restarting its 600,000-bpd Keystone pipeline. The pipeline was shut on November 17 after a 5,000-bpd leak, substantially reducing Canadian crude inflows into the U.S. and boosting WTI to above US$59 this last Friday.
Earlier this month, IEA itself sprinkled the market with a bearish scent after it lowered demand forecast by 50,000 bpd in 2017 and 190,000 bpd in 2018, raising concerns that the oil market is actually not as healthy as it seems. That puts demand growth at 1.5 million barrels per day this year, and only 1.3 million bpd in 2018.
Meanwhile, at yesterday’s meeting of the technical committee of the Vienna Club that monitors compliance with the cuts, OPEC chief Mohammed Barkindo praised the cartel and its partners: “…average conformity to the supply adjustments has been over 100 per cent since the implementation of the decision on January 1 of this year.” Barkindo added that investment is returning to the oil industry thanks to the cuts.
OPEC and its partners, led by Russia, are meeting to discuss the extension this Thursday. By Irina Slav for Oilprice.com