OPEC producers bearish on oil In 2016 as oversupply persists

16 December 2015, News Wires – OPEC producers see little chance of significantly higher oil prices in 2016 as extra Iranian production could add to surplus supplies and the prospect of voluntary output restraint remains remote.

OPECOPEC delegates, including those from Gulf OPEC members, say higher oil prices are not around the corner yet, despite further growth in global demand and as a rise in non-OPEC supply is tempered by prices that have more than halved in 18 months.

Some see a more balanced market by 2017 even though they expect further pressure on oil which could send prices to test the mid-$30 a barrel range on market sentiment rather than fundamentals, before slowly rebounding by the second half of next year.

The comments, days after OPEC failed to agree a production ceiling for the first time in decades, show delegates in the producer group are pushing back their expectations of a stronger market. In August, Gulf delegates were hoping for oil at $60 a barrel by this month.

“In the first half of next year, prices will be under pressure from supply being above demand and concern about Iranian supply,” said an OPEC delegate from a major producer.

“With the current low prices, I find it very hard to predict prices at more than $40-$45 for Brent in the whole year. I don’t think it will reach $60.”

Brent fell to $36.33 a barrel on Monday, its lowest since the financial crisis in December 2008, following OPEC’s Dec. 4 meeting where the group rolled over its year-long strategy of pumping at will in order to defend market share against higher-cost rivals.

“You cannot be optimistic in such market conditions, keeping in mind that today Brent is below $39 a barrel,” said a second OPEC delegate, from a non-Gulf member.

“I believe that 2016 is not going to be any better than 2015 with an average of $50 at the most unless OPEC takes action to decrease production, which is unlikely.”


The world is awash in oil – more than 2 million barrels per day in excess supply is implied by OPEC’s numbers – before any extra barrels that reach the market from Iran once Western sanctions are lifted.

In addition, say some OPEC sources, an anticipated U.S. interest rate rise this week could push prices further down, even if only for a short period of time.

But these sources also expect global inventories to start declining by the second half of 2016, supporting prices more towards the year-end.

Supplies from high-cost producers such as U.S. shale drillers are also set to fall more quickly into next year, despite being resilient until now, as many have been already operating at losses, they say.


  • Reuters
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