Say goodbye to USD 60 oil because the OPEC deal looks doomed - ING Groep NV
Bloomberg reported that oil risks sliding back under USD 60 a barrel as a surge in US shipments to Asia threatens to undermine a deal between OPEC and its allies, according to ING Groep NV. While the producer group complied with a pledge to curb output and ease a glut in 2017, U.S. flows that are gaining a bigger slice of the prized Asian market may prompt some nations to boost supplies, said Mr Warren Patterson, a commodities strategist at the Dutch bank. The resulting fallout could drag down crude prices after a rally of more than 40 per cent since June, he said.
Mr Patterson said in an interview in Singapore, referring to an output-cut agreement between the Organization of Petroleum Exporting Countries and other producers including Russia “The longer the deal goes on, it’s going to start falling apart. They continue to give market share away to the U.S.”
Brent crude, the benchmark for more than half the world’s oil, traded at USD 65.07 a barrel at 10:11 a.m. in London on Monday, compared with about US$45 in June. ING forecasts Brent at US$57 in the second half of 2018. Prices were at more than USD 115 in mid-2014, before a global glut sparked the biggest crash in a generation. West Texas Intermediate, the US marker, is currently near USD 62 a barrel.
Mr Patterson said that crude’s rebound since last year is encouraging American drillers to pump even as they make efforts to be disciplined on spending. He said that “We need to see prices in the short-term trade below US$60 to reduce that incentive for U.S. producers.”
As American output continues to expand, more exports will sail to Asia, the traditional bastion of Middle East producers. In February, even Saudi Arabia’s state oil company considered participating in these flows via a U.S. unit, before determining it wasn’t economically viable at the time.
Source : Bloomberg