Members of the Organization of the Petroleum Exporting Countries including Venezuela, Iran and Algeria are being badly pinched by falling oil prices CLZ5, +0.91% and have agitated for production cutbacks to push them back up.
The approach is having an effect: U.S. production has dropped in recent months, hit hard by oil prices that have fallen to less than $50 a barrel
But it also comes at a cost. Many large investment banks and oil companies are now predicting oil prices at around $60 a barrel in 2016 — far lower than needed to balance the budget in some oil-producing countries, including Saudi Arabia. They also come as some Middle Eastern national oil companies are delaying projects to save money.
On Tuesday, the IEA said “a lasting switch in OPEC production strategy in favor of securing a higher share of the oil market mix” could, among other factors, could keep the price of benchmark Brent crude LCOZ5, +0.53% around $50 a barrel through the end of the decade. OPEC’s oil export revenue would be 25% lower at those prices than it would be under a more bullish scenario in which oil rebounds to $80 a barrel by 2020. The IEA said the $80 scenario was more likely.Continue reading by clicking here.
Connect with us on Facebook and Twitter!