In one of the least surprising OPEC meetings in a while, members of the cartel of oil-exporting countries and their non-member allies agreed to extend oil production cuts on Thursday, which will support the price of oil and should continue to help pave the way for Alberta’s economic recovery.
The extension is for nine months, but after that opinions vary about whether oil prices will take off or start slumping yet again. The reason prices crashed in 2014 was because supply surpassed demand and inventory began piling up. OPEC’s move to limit production will help decrease oil stockpiles, but by how much?
Oil economist Judith Dwarkin suggests Canada’s oilpatch should savour OPEC’s oil cut while it lasts. She isn’t convinced the market will balance itself out.
‘We are concerned about the situation in the market in the first half of next year.’
– Judith Dwarkin, RS Energy Group
“The bottom line is — enjoy this while you can. If you see a spurt in price and you’re a producer, lock it in because we are concerned about the situation in the market in the first half of next year,” said Dwarkin, who works for RS Energy Group, a research firm based in Calgary.
Oil prices tumbled a few dollars after the OPEC announcement as some investors wanted deeper cuts.
“There is an enormous surplus of stocks around the world and that will suppress much upward price movement,” Dwarkin said.
She said there’s uncertainty about what will happen next year with some non-OPEC countries turning on the taps again, which could increase oil inventories and drive prices back down. There’s also the question of whether U.S. production will exceed expectations.
Some analysts are a bit more positive because they see oil inventories falling and…