Efforts by the Or-ganisation of Petroleum Exporting Countries (OPEC) and non-OPEC members to cut output in order to induce inrease in oil prices may not yield the desired results, experts have said.
Brent crude price suffered a relapse at the weekend, moving downward to $52, from $56 recorded some weeks ago.
OPEC and 11 other producers, including Russia, agreed in December to cut their combined output by almost 1.8 million barrels per day (bpd) in the first half of the year to eradicate excess supply and boost prices.
That agreement, which provided initial boost to crude prices, could be extended for six months, but experts do not believe prices would receive any significant boost.
The experts, who include the Society of Petroleum Engineers (SPE-Nigeria) Chairman, Dr Saka Matemilola and an Energy Economist with the University of Ibadan, Prof AdeolaAkinnisiju, said the hope of a further rise in the price of crude may be dimmed by the realities that would unfold in the market as time goes on according to The Nations report
Matemilola said the industry has its burst and boom period, adding that the boom in the price of crude oil will not come sharply, a development, which has cast a doubt on the Federal Government’s fiscal strategies of deriving enough earnings from crude oil exports to finance its 2017 budget.
He said the rise in the price of crude oil is predicated on some factors such as market forces, and politics in the global oil market, adding that no organisation or individual can control or regulate these factors.
‘’Often times, these factors are controlled by the forces of demand and supply. This means that when supply exceeds the demands, the price of crude will rise to between $120 per barrel to $130 per barrel in the foreseeable future. I can say yes, it is achievable. But the sharp rise in the price of crude would not be as rapid as that, in view of some factors in the market. These are swing in the demand and supply of crude oil and others,” he said.
Also, Akinnisiju said it had never happened before that the price of crude would move up in one fell swoop.
He said the market is highly sensitive, as it reacts to issues, policies and directions, in which production and price of crude oil move to in the industry.
He said there was a tremendous amount of stock in the markets and to expect a major increase in the price is not very realistic.
He said some producers might increase their production of oil, if they had suitable conditions or situations, adding that when this happens, there would be increase in supply of crude and its reduction in the price of the product.