OPEC producers have their sights set on a sustained oil price of $50-$60 per barrel, a modest ambition for the first cut in supply by the oil exporting group in eight years, says one of the industry’s top forecasters.
Benchmark U.S. oil prices CLc1 have risen around $4, or around nine percent, to over $48 per barrel since the Organization of the Petroleum Exporting Countries (OPEC) agreed last week to shave output.
“You don’t manage the market unless you have a price in mind,” said Gary Ross, founder and executive chairman at the New York-based consultancy PIRA.
“They are being cautious, they want to see what will happen with shale. But OPEC’s price aspirations only go up over time. They don’t go down.”
The deal marks the return to supply caps for the producer group after a brutal two-year free-for-all when OPEC members ditched output targets and pumped more than the market needed in a price war that bloodied U.S. shale producers.
U.S. oil output fell to around 8.7 million barrels per day in July, the lowest since May 2014 and down over 730,000 bpd on the year, mostly as shale producers hit by low oil prices cut output.
Ross challenged the assumption that a higher price could be self-defeating for OPEC because it will encourage shale producers to boost output.
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