XTB: oil rally?

Alejandro Núñez holds a bachelor’s degree in Business Management & Administration by the Complutense University of Madrid, and a bachelor’s degree in Actuarial Science. He also has a Master’s degree in Corporate Finance & Investment Banking by the I.E.B., as well as a specialization in technical and quantitative analysis by the I.E.B. He is an expert in sectorial analysis and an analyst at XTB Spain.

Global oil markets will face a deficit, instead of a glut during the first half of 2017, as OPEC and other producers deliver a deal to reduce supply, according to the International Energy Agency. Oil stocks will decrease by around 600,000 bpd over the following six months, given that the OPEC and its partners will cause an immediate impact. Russia, the largest non-OPEC producer joining the deal, will gradually implement the whole promised reduction in order to resist the rise in debt resulting from the drop in oil prices.

Upon the Vienna deal whereby OPEC agreed to “freeze” oil output, oil futures rose by 17 percent. 11 non-OPEC countries take part of that deal, including Russia and Kazakhstan. The questions we all are asking ourselves today are: how high will oil price go? Will it reach $100 again? All the answers can be found in the meetings or talks held by OPEC members and big oil producers. It is not clear yet if that supply reduction would be the solution to boost prices. It may happen that the “dis” agreement of some producers makes oil be traded  around $45 again, which is the situation of countries like Nigeria, Algeria and Russia that had to go into debt after the drop in oil prices.

The OPEC deal seeks to stabilize oil price between $51 and $61, a level already reached, in order to be beneficial for each and every country.

The impact of the non-OPEC cooperation is to assure that global market would be balanced, not facing a deficit, in the second quarter 2017, rather than in the third quarter. Saudi Arabia Energy Minister Al Falih stated that effective January 01st, Saudi Arabia is going to cut and cut substantially to be below the level committed to on Nov. 30, as the country was ready go below 10 million bpd — a level it has sustained since March 2015. Al-Falih and his Russian counterpart Alexander Novak also revealed they hold secret talks for almost one year to reach an agreement.

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