Some Gulf oil producers are concerned about the latest drop in oil prices, said Organization of the Petroleum Exporting Countries (Opec) delegates, but they see little chance of the group diverting from its policy of defending market share.
Brent oil LCOc1 is trading near $46 (€40.50) a barrel, close to its 2015 low after an 18% drop in July, pressured by abundant supplies and concern about the health of the Chinese economy, the world’s second-largest oil consumer.
Despite this, the delegates, including from Gulf Opec members, say China is still buying and stockpiling crude and they expect strong global demand growth should push prices back to $60 (€52.81) next year.
“There is a concern about th health of the Chinese economy, but as numbers have shown the need to import oil is increasing,” said an Opec delegate from a Gulf oil producer.
“Oil prices will remain volatile... but they will recover,” the delegate said this month, adding that he does not expect Opec to take any step now “due to unclarity” in the market.
Prices have more than halved since June last year.
Opec’s relatively wealthy Gulf members are better able to cope with low oil prices than the African members, Iran or Venezuela.
Led by Saudi Arabia, the Gulf members drove Opec’s strategy shift last year to allow prices to fall to discourage growth in competing supply sources.
While non-Gulf members of the Opec have frequently expressed concern since then about the drop in prices, Gulf members have rarely voiced such sentiments.
“Of course everyone is concerned, but we hope by the fourth quarter the market will start recovering,” a second Opec source said, citing the end of seasonal refinery maintenance that will boost crude demand.
Opec officials reconfirmed its market-share strategy at its last meeting in June.
At the time, delegates were expecting a recovery in prices towards the end of 2015, supported by expected higher global demand.
But those sentiments have changed with the latest oil price drop and as concern grows about the demand outlook in China.
“Prices are expected to stay under downward pressure until the expected enhancement in demand next year, then they can reach around $55-60 a barrel,” a third Opec delegate said.
Opec expects an acceleration of growth in world oil demand next year to 1.34m barrels per day, from 1.28m barrels per day this year, as well as an increase in the demand for its own crude as non-Opec supply expansion slows.
Although China’s crude demand has so far remained strong as authorities take advantage of cheap oil to build up strategic reserves and consumers kept spending, there are signs of weakening, with the devaluation of the yuan potentially denting fuel imports.
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