Expert: Oil price rises, but far from recovery

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Europe

04:36

Oil prices held firm on Friday near four-year highs, resulting from OPEC-led supply cuts, a pick-up in global oil demand as well as the news of air strikes on Syria. But the price has yet not recovered, according to Jameel Ahmad, the VP of Market Research at ForexTime (FXTM).

Earlier this week, both Brent and West Texas Intermediate (WTI) hit their highest levels since November 2014, at 74.75 US dollars and 69.56 US dollars per barrel respectively.

“That suggests the news of air attack on Syria over the weekend has increased the sentiment towards global oil market,” Ahmad said.

“There are a couple of different factors playing in the oil market,” he explained, attributing the price hikes more to the increasing demand and continuous supply cut, rather than the Syria situation.

He noted that the optimism of global economy is at its highest level since the global financial crisis in 2007, which significantly raised the oil demand.

Meanwhile, the oil production cut deal among OPEC and non-OPEC members is another price booster. “As oil demands increase, but supplies reduce, the sentiment of [the] oil market is increasing,” he added.

However, it is not the right time yet for oil producers to celebrate. The oil prices are still far from recovery.

“We are still significantly below the peak of the oil prices earlier in 2014, which was around 110-115 US dollars per barrel,” said Ahmed, adding, “the main reason for the significant drop in oil price was the increasing productions of US shale oil. And the US is not a partner of OPEC commitment to limit the production.”

“If the sentiment of oil market leads to the production increase from the US side, the selling pressure of crude oil market will increase. And that will prevent oil price to reach the previous high level of 110 US dollars,” he said.

(CGTN’s Du Zhongyan also contributed to the story.)