IQI Group Holdings Chief Economist/Investment Strategist Shan Saeed said the optimism was based on a few factors, including geopolitical risks and bankruptcy filings in the United States and Canada, which would be a huge drag on the global economy, while possibly driving oil prices higher.
“I feel at the moment, crude oil prices should be trading at between USD50 and USD60 per barrel,” he told Bernama.
He said demand is anticipated to reach between 94 million barrels and 95 million barrels daily over the next two years – close to the current global production of 96 million barrels daily.
Brent Crude, the global benchmark for crude oil, stayed above USD50 per barrel today, supported by declining US inventories which recorded a contraction for the third consecutive week.
Meanwhile, MIDF Research economist Izzuddin Yussof said the oil price was unaffected by the outcome of the Opec meeting on Thursday as investors had already discounted the likelihood of any output cap agreement being reached, due to Iran’s eagerness to ramp up production.
“Iran will not agree to any output cap in trying to regain its previous market share (before Western sanctions).
“The price also remains around the same level, despite the failure by Opec to cap output,” he added.
He said global production had begun to fall since early this year, making the current level of oil prices sustainable, when compared to previously at below USD30 per barrel.
“The previous level, where it dived lower than USD30 per barrel, was unsustainable as it was lower than the cost of production for many countries, hence pushing down the production level,” he added.
Going forward, Izzuddin said much of the reasons which contributed to the recent rebound in commodity prices, had been priced in by investors, leaving the state of China’s economy as the only remaining unknown factor that could influence oil prices.
“We are at the moment expecting China to continue to stabilise, hence helping the demand for oil,” he added.
Asian Strategy and Leadership Institute (Asli) Director Ramon Navaratnam said global oil prices are expected to trade 3% higher than the current level of USD50 per barrel by end-2016.
“It should remain at this level, maybe above USD52 per barrel or USD53 per barrel this year,” he added.
He, however, lamented Opec’s indecisive stand in supporting oil prices which was affecting global economic sustainability and progress.
Meanwhile, oil and gas service provider Alam Maritim Resources Bhd Group Managing Director and Group Chief Executive Officer Azmi Ahmad hoped Opec will commit to its promise to set a better price for oil which would trigger positive sentiment in the market.
“By setting a ceiling, not producing more and with production outages in Canada and Nigeria, taking barrels off the market will boost prices,” he added.
However, Azmi said oil prices are still deemed sustainable, if hovering between USD50 and USD60 per barrel.
— BERNAMA