OPEC bullish on oil demand in H2 2016, says current price slide ‘temporary’
OPEC on Monday sounded an optimistic tone about the oil market, saying that higher demand is expected in the third and fourth quarters.
The comments, from Qatar energy minister Mohammed bin Saleh Al-Sada, who serves as OPEC president, are likely to quell any expectations of a production freeze deal in the near future.
The recent decline in oil prices is only temporary, and the result of weaker refinery margins, inventory overhang and the UK's recent vote to leave the EU, Sada said, according to an OPEC news release.
With major oil consuming countries seeing their economies improve and winter approaching in the Northern Hemisphere, oil demand will rise in the next two quarters, he continued.
This expectation of higher crude oil demand in [the] third and fourth quarters of 2016, coupled with decrease in availability is leading the analysts to conclude that the current bear market is only temporary and oil prices would increase during the later part of 2016, OPEC stated.
OPEC member countries are scheduled to meet informally on the sidelines of the International Energy Forum in Algeria from September 26-28.
The Wall Street Journal on Friday had reported that a production freeze deal could be mooted at that meeting, citing unnamed OPEC delegates, but several analysts are doubtful that such a pact could be agreed.
Can't help but be sceptical on the resumption of this merry-go-round again after the January-April go around, Wood Mackenzie analyst Ann-Louise Hittle said in a tweet.
Another analyst, who spoke on condition of anonymity, said: As things stand, we wouldn't expect OPEC to substantially change course unless there is a significant deterioration in global prices.
The last time a production freeze agreement was on the table, several OPEC members met in Doha in April along with a handful of major non-OPEC producers, notably Russia. A deal to keep output at January levels fell apart at the 11th hour with Saudi Arabia insisting that Iran � which did not attend� participate in any production agreement.
Iran has said it would not participate until its production reaches pre-sanctions levels. That could be achieved later this year, though analysts have said Iran could see difficulties in maintaining that level of output, given the lack of investment over the past few years.
OPEC, for its part, said it continues to monitor developments closely, and is in constant deliberations with all member states on ways and means to help restore stability and order to the oil market.
The producer group's next official meeting is November 30.