Algeria to take part in OPEC, non-OPEC meeting

A leading New York-based analyst believes the bottom of oil prices has been reached and the market’s long rout will soon be over with a price equilibrium of $50 per barrel being established.

But markets still held onto most of their recent gains with London benchmark Brent staying above the $40 a barrel line. At the same time, the United States Oil Fund LP (ETF) (NYSEARCA:USO) was trading up by 3.63%. Why would the ministers meet again now?

Another OPEC delegate was more pessimistic, saying he expected no major progress until OPEC’s next scheduled meeting in June. Even if Saudi Arabia wins its struggle with USA shale producers over market share, it will face a new billion-barrel adversary.

On Thursday, TASS reported that the Venezuelan Oil Minister Eulogio del Pino also reiterated this expectation from both OPEC and non-OPEC members.

“Russian production is going down anyway, why not agree to a freeze and then cuts?“. The Kingdom’s Foreign Minister Adel al-Jubeir said on Saturday that speculation of the country cutting its production while others ramped up theirs was “not a realistic one”.

We see the statement to point toward the drawdown in supply from the U.S., as producers in the country feel low crude oil prices’ pressure on the sustainability of their operations.

Moreover, production outstrips consumption by around 2 million barrels a day, according to the Organisation for Economic Cooperation and Development, OECD’s energy arm of the IEA. Hedge funds have unwound bearish bets at the fastest pace in 10 months as fear of oil sinking to $20 a barrel faded. If these numbers prove to be accurate, and with the market already awash in oil, it is very hard to see how oil prices can rise significantly in the short term. Supply and demand data for the second half of the year suggests more stock building, this time by 0.3 mb/d.

While the price collapse is a boon to consumers, who are enjoying the lowest gasoline prices in a decade, and the petrochemical sector, crude producers have seen their profits evaporate and debt accumulate. For a possible rebalance in the markets, crude oil held in inventories would have to be consumed.

Gary Ross says $50 “is going to become the new anchor for global oil prices”.

The pact will do little to curb immediate oversupply, especially with Iran exports still swelling after the end of sanctions.

Baker Hughes (BHI) reinforced the pain that producers are feeling after reporting that energy companies cut the number of active oil rigs by 8 which is the 11th week in a row that rig counts fell.

The freeze agreement from last month had carried a condition with it: Other producers around the world conform to the agreement and keep their production rates unchanged.