PROFILE
THE NEW YEAR holds exciting prospects for the commodity industry as oil is pitched to recoup and recover towards $ 60 per barrel within the first half of the year . The last two years have been extremely difficult for oil as it battled against the steep glut which pushed the prices to as low as under $ 28 a barrel last February , leading OPEC to rethink their strategy .
The agreement from OPEC along with a few of the non-members for a production cutback last December was the biggest news of 2016 . While the consortium of oil producers agreed to take on 1.8 million barrels per day reduction , the feasibility of the deal was questioned well until the beginning of 2017 . Given such scepticism , it was understandable that oil was restrained around USD $ 54 .
So far , producers are honouring their commitment . Prices are seeing a recovery but a wait-and-watch approach is required for us to coordinate and match the actions of the main players . A sustained price above say USD 55 would be likely to encourage a significant increase in supply from shale price . The prospect of such supply
is likely to cap the potential for the price to increase significantly .
Saudi Arabia The current plan of action by OPEC is a major shift of strategy from the last two years ( when Saudis tried to use low prices to drive out the US shale producers ) to an output reduction strategy . The combined intervention of both OPEC and 11 non-members should see the glut slowly clear , and if everything goes according
10 July 2017