Oil on the Rise After reaching its lowest price for 15 years back in January, we have seen the oil prices rising in the recent months since June. The price recently reached a two-year high following a partial closure of the Keystone pipeline connecting Canada-US oilfields. With more upcoming meetings and geopolitical tensions rising in the Middle East, the future of the oil prices will depend on how the future events unfold.
OPEC Meeting The next Organization of the Petroleum Exporting Countries (OPEC) is taking place on 30 th November in its headquarters in Vienna, Austria. It is expected that the pact on cutting output beyond March 2018 expiry will be extended, although Russia – a non-OPEC member and the second largest oil exporter in the world has sent mixed signals about its support for an extension on the cuts. “With the majority of OPEC members endorsing an extension, Russian support is the key risk,” Jon Rigby, head of oil research at UBS, wrote in a note. Last month, President Vladimir Putin indicated that Russia is backing extending the deal to the end of next year, but recent comments by officials and Russian media have created uncertainty since Putin’s comments.
British bank and financial services company Barclays expects a 6 to 9-month extension of an OPEC led deal to limit oil output during the meeting on 30 th November. The bank expects Brent to remain above $60 per barrel in the last quarter of this year and fall to $55 in 2018. “Whether or not the countries extend and the duration of the deal are not the relevant questions in our view. We believe the level of the cut is what really matters, and we assign a low likelihood to this detail being announced on November 30,” analysts at the bank said in a note. “If the meeting concludes as the market expects, prices could experience a short-term selloff, but the technicals and fundamentals will likely remain constructive,” the bank said.
Other concerns for oil prices are the geopolitical tensions in the Middle East. Saudi Arabia and Iran have been involved in aggressive exchanges over the conflict in Yemen with both countries backing different sides. The Gulf region exports around 28 million barrels a day which is almost one third of a global production, therefore its important the relationships in the Middle East does not intensify further.
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