Oil price is racing towards $58 a barrel Monday after positive comments indicating that the on going rebalancing of the oil market could see a sixty dollars oil should OPEC and its allies extend their crude production cuts beyond March 2018.
“Things are looking a bit more constructive,” says Dion Kronfol of Franklin Templeton. “We have been saying for sometime that OPEC production cuts are helping to stablise the oil market and the compliance regime is sticking so it is quite reasonable to expect that oil prices will remain firm.”
Brent is currently trading at $57.74 a barrel.
“Rebalancing is already on the way,” says Janet Kong, Eastern Hemisphere Chief Executive Officer of integrated supply and trading at BP, said in an interview in Singapore. But OPEC needs “definitely to cut beyond the first quarter” to bring inventories down and back to historically normal levels, she said.
According to Kong, “if they extend the cuts, yes it’s possible” to achieve $60 a barrel next year, she said. “But it’s hard for me to see that prices will be sustainably higher,” she added.
The view from BP follows a gathering in Vienna by the Organization of Petroleum Exporting Countries and its partners that concluded with no decision on an extension or deepening of supply cuts.
Oil has struggled to hold above $50 a barrel in 2017 as investors weighed signs of a whittling worldwide crude glut against concerns the U.S. will boost oil production.
Although better known for their oil fields, refineries, and service stations, BP, Royal Dutch Shell Plc and Total SA are also among the world’s biggest energy traders. From dealing floors that resemble the operations of major Wall Street banks in cities including London, Houston, Chicago and Singapore, BP has a privileged watchtower over the global oil market.
Asked whether she will buy or sell Brent crude, the benchmark for more than half the world’s oil, at an average of $60 a barrel in 2018, Kong said “I will sell that.”
Kong was speaking as the who’s who of the oil trading industry gathers in Singapore for the annual Asia Pacific Petroleum Conference (APPEC), a collection of public events, client meetings and evening cocktail parties that serve as a good barometer of the health of the global oil market.
