$100 a barrel Oil ceiling

OPEC sees oil price below $100 a barrel


Representatives of the Organization of Petroleum Exporting Countries (OPEC) see no reason for oil price to advance to the level of $100 per barrel in the next decade. This pessimistic assessment was announced in the light of the increase in capacity. According to the report, oil prices, probably, will be about $76 a barrel in 2025 in OPEC’s most optimistic scenario. It also contemplated situations where crude oil costs below $40 a barrel by the same time. OPEC tries to steer during historical price confrontation, which was partly caused by the increase in the US supplies. Typically, in response to such actions the cartel cuts its own production to reduce supplies and, thus, to pump up prices, but last year the group decided not to do that. Instead, some OPEC nations, notably Saudi Arabia, have flooded the market with more crude and cut prices in hope of keeping customers. In addition, the inability of OPEC to stop the price fall is of paramount importance for oil-producing countries, which are in need of cash to balance their budgets. Only two OPEC members – Qatar and Kuwait – can cover their planned government expenditure at $76 per barrel, according to data from the International Monetary Fund. Most cartel’s members require prices to be well above $100 a barrel. For example, Algeria needs the price to be more than $130 per barrel, as IMF estimates. However, such scenario was not even considered.

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