© Thomas Pugh
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My base case scenario is that I do not expect them to announce anything at the meeting between OPEC and non-OPEC producers in Algeria this week.
Venezuela's oil minister Eulogio Del Pino said last week that a fair oil price would be $70 per barrel. Do you share his point of view or not? Why?
I would assume that $70 per barrel does seem to be a reasonable price that would balance the market and will still guarantee a decent demand growth, whilst allowing investments to be profitable. Hence, you would not get big swings of investment cuts that lead to supply deficits, which would get the price of the commodity shooting. Therefore, I do think that a price of about 70$ per barrel should be reasonable to balance the market.
What factors will determine oil performance and where do you foresee oil prices for the end of this year?
For the end of this year I see the price of oil standing at about $45 per barrel.
As concerns the main factors that will determine the price, I would say that the key thing would certainly be what happens in Algeria this week. If there is no output freeze, that would probably not make too much difference; however, if there is a cut, that would make a significant difference. Whatever happens with Libya and Nigeria, if their increase in output turns out to be permanent, that would have a very big impact in terms of pulling down prices over the rest of this year and even further into 2017. Moreover, they continue to respond to the US oil production. As we have been able to see, that has started to tick up over the last month or so. Thus, if that continues, that could scupper a lot of assumptions around falling OPEC supply.