The price of oil may have finally hit rock bottom, giving a glimmer of hope to oil companies, according to a report released Friday by the International Energy Agency (IEA).
Crude prices have seen better days recently, as the price of oil on the market has dropped from a $100 per barrel high in 2014 to a $27 low in 2016. But there might be a reason for oil producers to be optimistic — the price of oil has gone above $40 a barrel for the first time in 2016.
“It is clear that the current direction of travel is the correct one, although with a long way to go,” the oil market report warned. The report added, “There are signs that prices might have bottomed out.”
The IEA attributes the price increase to Organization of the Petroleum Exporting Countries’ (OPEC) decision to freeze oil outputs, as well as Iran’s slower than expected move into the crude trade business after seeing U.S.-administered trade sanctions lifted.
Before the sanctions were lifted, energy insiders and analysts believed Iran would contribute as many as 500,000 barrels of oil into the market — but that simply hasn’t materialized, as the Islamic nation’s output was pegged at 200,000 barrels in February.
Overall, oil outputs have also ticked down, the report notes.
“Global oil supplies eased by 180,000 barrels per day (180 kb/d) in February, to 96.5 million barrels per day (mb/d), on lower OPEC and non-OPEC output,” the IEA report said, though the study sparked a warning. “The foundations for global demand growth are sound, but not rock-solid.”
The recent uptick in prices may not be enough to squelch fears among oil producers and financial institutions.
Norbert Ruecker, the head of the research arm of Swiss private bank Julius Baer, argued Baer “still believes that oil prices experience a short-term bounce but no long-term recovery.”
Investors at Goldman Sachs told reporters Thursday the “oil price rally will prove self-defeating as it did last spring,” if nothing is done about the massive oil outputs.
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