OPEC producers are concerned regarding the possibility that a weakening demand and excess supply can undermine crude prices in the first semester of 2018, sources in the OPEC and the sector stated.
Brent crude went up by 30 percent since June, boosted by production cuts applied since the beginning of the year by OPEC producers, Russia, and several other nations. Hurricane Harvey brought progress, by paralyzing almost a fourth of the U.S. refining capacity.
Brent prices surpassed the $59 mark this week, reaching two-year highs. Sources from the Persian Gulf said that Saudi Arabia, the largest OPEC producer, is aiming to reach $60 this year. Brent stood above $58 on Thursday.
“I don’t think it’s sustainable,” a source in the industry said, quoting a potential excess supply from U.S. shale producers during the first months of 2018, encouraged by current high prices.
OPEC and non-OPEC producers agreed to curb output by around 1.8 million barrels per day (bpd), but U.S. shale producers have been filling this gap and their production is expected to rise for the tenth month in a row in October.
An increase in global oil demand also helped boost prices, as tensions in Iraq – an OPEC member – where authorities of the semi-autonomous region of Kurdistan held a referendum for independence, despite opposition from Baghdad and the Western powers.
A source from an important Middle Eastern producer indicated that the price surge “could be short-lived.”
“I believe that a range between $50 and $55 is good. You wouldn’t want the price to increase above $60, as that would bring more shale oil,” the source assured.