An employee adjusts a pipeline valve in the Duna oil refinery. (Photographer: Oliver Bunic/Bloomberg)

Oil’s Comeback Maybe A Double-Edged Sword

Crude oil’s recent rebound to a near three-year high may well surprise oil exporting countries that have vowed to cut production at least till the end of 2018.

That’s because higher prices would provide additional incentive to the U.S. shale oil industry to increase production, Fatih Birol, executive director at the International Energy Agency, told BloombergQuint on the sidelines of the World Economic Forum in Davos, Switzerland. “This would mean more oil would come to the market and provide downward pressure on prices."

After tumbling below $45 a barrel in mid-2017, crude oil prices rebounded after the Organization of Petroleum Exporting Countries and its allies cut output to clear a global glut.

In January, prices hit $70 for the first time since late-2014 as OPEC and Russia extended cuts till the end of this year.

“When we see 2018, we see more of a balanced picture,” Birol said. A lot of oil will come from the U.S. at the time of “healthy demand growth”, he said.

Birol doesn't expect oil prices to reach the three-figure mark anytime soon. At least till there are no geopolitical tensions casting a shadow over the energy market.

Of course geopolitical developments are something you cannot predict, but if everything is left to the market I don’t see any reason for oil price to go $100.
Fatih Birol, Executive Director, IEA