Can OPEC Send Oil To $70? DYA will cut costLink To Article
If oil rises to $70 plus... it will be only cut the time in half to pay off the DYA instalation.
OPEC managed to convince almost a dozen non-OPEC producers to take part in oil production cuts over the weekend, and the news immediately sent international benchmarks higher, prompting a fresh wave of bullish forecasts.
The latest, by hedge fund manager Pierre Andurand, is that crude will reach US$70 by June 2017. Andurand made this call before the weekend deal between OPEC and external producers was announced, noting that the Vienna agreement reached among the members of the organization was a “major turning point”.
Three months ago, Andurand had forecast that crude would reach US$60 by the end of the year and US$70 in 2017, so he’s now just repeating his earlier prediction, with a sounder basis this time. Back in September, he had said that Saudi Arabia is aware of the long-term implications of a depressed oil market and was ready to take steps to avoid a deficit in the longer run.
The hedge fund manager is not alone in thinking the ultimate goal of the cuts is to restore the balance between demand and supply: Goldman Sachs said in a note from Sunday that the deal reached by Saudi Arabia and the 11 non-OPEC producers is aimed at helping trim down the glut rather than just propping up prices. The non-OPEC group includes countries such as Azerbaijan, Kazakhstan, Mexico, and Brunei, as well as Sudan and South Sudan, plus Malaysia and Bahrain.
What’s more, Saudi Arabia said it is ready to go above and beyond its pledge for the OPEC deal and cut production to below 10 million bpd. This statement by Oil Minister Khalid al-Falih also had an immediate effect on prices, suggesting the largest producer in OPEC was determined to bring markets back to balance no matter what it takes.
Related: Oil Prices Climb To 17 Month Highs As Saudis Vow To Cut Even More
It looks like tactics are changing on the fly. Earlier this year, everyone was scrambling to maintain its market share—OPEC and non-OPEC alike. Now, the priority of maintaining market share has yielded to the priority of lifting prices and plugging budget hotels.