Oil needs Opec cuts
Published on 27.11.2018 18:21

The latest tumble in the oil price has now reached gigantic levels, almost equaling the declines reached during the global financial crisis and according to some analysts, we may finally be near the bottom.

It now seems that Opec is going to come to the rescue and cut production which some say is long overdue and should have been obvious considering what happened during the last crisis.

"The oil price correction has become a rout of historic proportions," noted analysts from U.S. investment bank Jefferies.

"The negative price reaction is as severe as the 2008 financial crisis and the aftermath of the November 2015 OPEC meeting, when the group decided not to act in the face of a very over-supplied market," they added.

Although Opec is rumored to be on the Brink of cutting production, analysts from Goldman Sachs predict that until the cartel makes some concrete moves, the oil price is bound to be volatile and may experience further losses.

“While we expect prices to eventually recover, we continue to expect high price volatility until evidence that the oil market fundamentals are improving, requiring a decline in OPEC production and signs that demand growth is resilient.” The analysts said

With oil around $50 a barrel, Shale oil producers from the US are feeling the pinch and for some drillers, this price boarders on oil exploration being unprofitable which may lead to an exodus of drillers which may be another factor on removing excess oil from the market which will also help support the price.

The material published in on this page is produced by the FIBO group companies, and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC; furthermore it has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

Andrew Masters

Analyst

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