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Crude oil could drop to $ 50 a barrel under the double weight of geopolitical concerns and rising production in the United States. This was stated by the co-head of global oil trading Trafigura, who spoke with Bloomberg.
"I can see that we are moving towards $ 50 in the short term, but I think the medium and long term price is $ 70 to $ 75," said Ben Luckock, adding, "We do not think the current level of reductions and compliance of OPEC is enough to raise oil. "
It seems that OPEC also does not think that the current cuts are sufficiently deep. This is a lot to say because the current cuts are actually deeper than OPEC decided to do in December, mainly because of the continued decline in Venezuelan production. In July, for example, OPEC stated that its compliance rate for reductions had reached 159%. Judging by the price movements, even this proved insufficient to quell the fears of global economic growth in the context of the US-China trade war and concerns over oversupply caused by incessant rise in American shale production.
OPEC also has bad news. Bloomberg reports that Sanford C. Bernstein & Co. has estimated that the cartel and its partners will deepen cuts of one million bpd next year to keep Brent at around $ 60 as US production continues to grow.
However, according to Luckock, from Trafigura, the fall in prices was in charge: the lower the price of oil, the less American shale drillers have to invest in a new production. Thus, when prices fall, they will limit spending and production growth will slow down. Shareholders and Harold Hamm of Continental Resources have already made calls to this effect. They warned his peers a few years ago that they were sinking into oblivion.
OPEC + meets later this week to discuss the market situation.
By Irina Slav for Oilprice.com
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