How long will OPEC need to support oil prices?

Baku, Azerbaijan, Sept.5

By Leman Zeynalova – Trend:

The need to support prices will last until OPEC sees some sustainable price recovery, Gal Luft, co-director of the Institute for the Analysis of Global Security (IAGS), a Washington based think tank focused on energy security, and a senior adviser to the US Energy Security Council, told Trend Sept.5.

“We will see attempts to extend the deal beyond March 2018 and perhaps even attempts to lure Libya and Nigeria back into the quota system,” said the expert.

Luft pointed out that with diminishing oil revenues due to prolonged period of low oil prices OPEC members are under severe economic burden.

“They can no longer balance their budgets and their borrowing costs in the global debt market are rising. The more financially strained those members become the more aggressive in dialing back production they will be,” added the expert.

Regarding the impact of Hurricane Harvey on the global oil market, Luft said that the damage inflicted to the oil facilities by Hurricane Harvey is relatively minor and most of the offshore facilities will resume activity in the coming days.

“So I don't see long term impact on the global oil market,” he added.

On May 25, OPEC member countries and non-OPEC parties, Azerbaijan, Kingdom of Bahrain, Brunei Darussalam, Kazakhstan, Malaysia, Mexico, Sultanate of Oman, the Russian Federation, Republic of Sudan, and the Republic of South Sudan agreed to extend the production adjustments for a further period of nine months, with effect from July 1, 2017.

The reductions will be on the same terms as those agreed in November.

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Follow the author on Twitter: @Lyaman_Zeyn

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