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Monday, November 2, 2015

OPEC Oil price-2016: "There is no one who really knows the world oil prices projection" U.S. expert.

OPEC Oil price-2016: "There is no one who really knows the world oil prices projection" U.S. expert. (Taz).

Lifting the sanctions against Iran could increase the supply of Iranian oil to the world energy market for half a million barrels per day next year. This amount of Iranian oil supply will hold the world’s oil prices at the current low level. The International Monetary Fund (IMF) believes that Iran will increase its oil production (including condensate) by 20 percent to 3.7 million barrels per day in 2016.

Tehran now is actively promoting its new type of oil contracts, claiming Iranian energy market’s foreign investment openness.

US oil experts hardly believe Iran is able to strongly influence the world oil market in the nearest future that is to increase production up to 4.2 million barrels per day. There are two reasons for that disbelief: no effective economical methods for enhanced oil recovery and weak oil infrastructure in Iran. Tehran needs a lot of investment to solve these two major issues.

"There is no one who really knows the world oil prices projection. Iran may be able to increase oil production by one million barrels per day only after few years," said a US expert who asked to remain anonymous.

It is obvious no one can predict oil prices with absolute certainty but taking into account Iran, Russia and Saudi Arabia oil production increase, a lot of experts assume the oil price is going to be $58-60/barrel next year.

None of the experts, oil ministers expect a sharp oil price recovery or harsh "back to the good old" $100/barrel within the nearest future. Current oil market situation leads experts to wonder about the necessity to maintain OPEC. Is there a need? OPEC hardly carries out its functions and barely protects the market from the oil prices rapid decline.

An American economist who has decades of oil consultancy experience believes that OPEC's time is long gone, and there is no need for it today.

There are many OPEC member countries that carry out totally independent policy from OPEC since the cartel has been created. Since they have an independent policy from OPEC it adds a lot of economic misunderstandings to the oil market forecast.

"OPEC declares one projected oil production figure but the physically produced oil amount is another number all-together. These things are never plain sailing with OPEC," the expert stated.

In fact, the strong independent policy of some OPEC members has led them to state budget deficits. Next year the IMF experts’ expectation of Iran, Algeria, Iraq, Saudi Arabia and the United Arab Emirates’ state budget’ will face deficit, taking into account the 2016 year oil price forecast at $60/barrel. Libya will face the worst budget deficit. IMF experts think Libya’s breakeven oil price is $207/barrel. That is above and beyond the most optimistic wishful thinking. Oil at this price is a mirage in the sand.

The oil dependence reduction is the question of the hour , more than ever. Last September’s situation when the oil price has started to decline rapidly once more, reflected that neither OPEC nor anyone else can stabilize the prices as they wish. It is a true fact that the average Brent price since the beginning of 2015 is $54/barrel vs $98/barrel in 2014.Read the full story here.

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