Oil price plasters over OPEC rifts

FRENCH PRESS AGENCY - AFP
VIENNA
Published 06.06.2016 00:41
Updated 06.06.2016 00:43

OPEC looks to be in a happier place with oil prices recovering, but its inability to agree on an output ceiling to restrain the flow of crude betrays lingering divisions that could spell trouble ahead, analysts warn. Meeting in Vienna on Thursday, OPEC expressed confidence that the crisis of the past two years that saw prices plunge and splits emerge is now over. It said that since December, "crude oil prices have risen by more than 80 percent, supply and demand [has been] converging and oil and producer stock levels in the OECD [Organisation for Economic Co-operation and Development] have recently shown moderation."

According to Helima Croft at RBC Capital Markets, the mood at the biannual gathering was a "lot more upbeat" than the acrimonious last meeting in December. Saudi Arabia's energy minister, Khaled al-Falih, newly appointed by the kingdom's dynamic Deputy Crown Prince Mohammed bin Salman, went on a "charm offensive" to "mend fences," Croft said.

This was helped by the fact that OPEC's Riyadh-driven strategy to maintain oil output at high levels in order to preserve market share and squeeze competitors despite low prices, which appears, at last, to be working. With dozens of U.S. shale oil producers going bankrupt, non-OPEC output is forecast to fall and prices have recovered to around $50 a barrel, a six-month high, having tumbled from over $100 in 2014 to almost $25 in January. At the same time, the International Energy Agency predicts the stubborn global supply glut, which sparked the vicious price collapse, would "shrink dramatically" this year. Demand also looks healthy.

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