By Sebastine Obasi

The fall in oil price being experienced for more than a year now may not continue as the Organisation of the Petroleum Exporting Countries, OPEC, said there is light at the end of the tunnel.

This is coming as OPEC is scheduled to meet later this week in Doha, Qatar. According to OPEC, international crude oil prices have recovered remarkably in recent weeks. From a nadir of $28.5/bbl in mid-January Brent crude is now trading around $40/bbl, showing that there are signs that prices might have bottomed out.

It explained that “the factors cited in the report that currently support higher prices include: possible action by oil producers to control output; supply outages in Iraq, Nigeria and the UAE; signs that non-OPEC supply is falling; no reduction in our forecast of oil demand growth; and recent weakness of the US dollar.”

It further stated that later this month some oil producers are expected to meet to discuss a possible output freeze. “We cannot know what this might be and in any event it is rather unlikely that an agreement will affect the supply/demand balance substantially. Before any production freeze or cut is agreed, we have seen supply disruptions in Iraq, Nigeria and UAE. Production from these countries fell in February by 350 kb/d. Meanwhile, Iran’s return to the market has been less dramatic than the Iranians said it would be; in February we believe that production increased by 220 kb/d and, provisionally, it appears that Iran’s return will be gradual.”

According to OPEC, the focus is on non-OPEC countries to see if high-cost output is falling.

It said: “There are already signs that this is happening: in the US, we expect production this year to fall by 530 kb/d, and we have downgraded our 2016 outlook for Brazil, Colombia and others. For the non-OPEC countries we now expect production to fall by 750 kb/d: our view last month was that this number would be 600 kb/d.

“Of course, there is no guarantee that this trend will continue, but there are clear signs that market forces – ahead of any production restraint initiative – are working their magic and higher cost producers are cutting output.

“We have warned in earlier reports that the risks to global oil demand growth are almost certainly on the downside. For now, we have left unchanged at 1.2 mb/d our estimate for growth in 2016. Many reports claim that strong demand for US gasoline is a factor behind recent price bullishness but they overlook weakness in other products e.g. middle distillates.”