The oil price rose Thursday, on evidence production and inventories in the US fell again, while data from China underscored strong demand for the commodity.
Meanwhile, the latest report from the International Energy Agency (IEA) indicated that although good progress in the oil market is being made, the price of oil will likely hit a ceiling in 2018.
“Looking into 2018, we see that three quarters out of four will be roughly balanced – again using an assumption of unchanged OPEC production, and based on normal weather conditions,” the IEA said in its oil market report.
It added that a lack of discipline on oil production, particularly among non-OEC members, could “act as the ceiling for aspirations of higher oil prices.”
More work required in 2018
The price of Brent crude oil rose on Thursday’s mixed news, ending the US trading session at $57.50 per barrel. The price of Western Texas International oil, (WTI), meanwhile, ended up at $51.59 per barrel.
To help keep oil prices around these levels, or closer to the preferred $60 per barrel level, will likely require more discussions and co-operation over production among all oil producing countries. Whether they’re members of OPEC, or not.
That’s a view shared by a variety of market participants and analysts alike.
Indeed, earlier this week, Mohammed Barkindo, the head of OPEC told the India Energy Forum that the US needed to work with OPEC and come up with a plan on output, together.
Current oil output cap should continue
An oil production cap is currently in place until 2018. It’s being closely adhered to by OPEC and some non-OPEC members.
But, to help ensure the production of oil remains balanced and keeps prices around the $60 per barrel mark that’s suitable for suppliers and importers of the commodity, it’s been suggested the cap should be extended beyond March 2018 when it is set to end.
Right now, global oil inventories aren’t too far above the five-year average. But, as the IEA report highlights, to help push them down a little further, the historic accord struck between OPEC and Russia just over a year ago, needs to run for longer. And, if possible, gain agreement from other non-OPEC members, too.