Oil market under cloud of uncertainty

Oil market under cloud of uncertainty

Elisa Maria Giannetto
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Following a period of relative price stability, the climate of uncertainty about the future revisits the oil market. Experts project a price war that could push the commodity to $42 a barrel

The oil market has just gone through one of its most difficult weeks in recent memory. After months of relative stability, with futures priced between $50 and $55 a barrel, uncertainty oil priceabout the commodity’s future has returned. Analysts are not excluding the possibility of a price war that could send crude prices plunging to $42 a barrel. The projection was also advocated by certain attendees at CERAWeek, an event gathering major oil & gas sector representatives in Houston, Texas. OPEC secretary general Barkindo and Saudi Arabia’s oil minister indicated that it is unlikely that the oil cartel will manage to continue to limit production beyond 30 June, when the output cut deal signed by OPEC members and a number of major non-OPEC producers in December will expire. Thus far, the burden has fallen primarily on Saudi Arabia’s shoulders. Experts point out that if Saudi Arabia is removed from the equation, compliance with the agreement among participating countries has not exceeded 50%. These numbers have quashed any talk of crude prices reaching $60 a barrel. Other countries have been acting as free riders, ready to jump ship as soon as the market outlook improves. Reuters reports that the main result of the Saudis’ efforts has been to rekindle the competitiveness of the United States, which has resumed exploration and extraction at full steam, surpassing last year’s peak output of 1 million bpd. Saudi Arabia does not appear to have any intention of standing idly by, with Saudi Aramco cutting a $35.9 million deal with Arabian Pipes to supply steel tubes for extraction. The deal would appear to vindicate the price war prophets who foresee a state of affairs in which only those able to offer the most market bottom prices will be spared.