Despite a recent OPEC agreement to cut oil production and boost prices, it is unrealistic to expect that the commodity will reach $65 a barrel in the near term, an analyst at the Paris-based International Energy Agency told CNBC.
OPEC countries reached an agreement last November to cut production by 1.2 million barrels per day to support oil prices and tackle three-consecutive years of falling investment. In early December, some non-OPEC countries, such as Russia, joined their efforts and promised to cut output by 600,000 barrels per day.
“I think 63, 65 (dollars a barrel for Brent) I think you might be a little bit ambitious there because the OPEC producers have got this basic issue, they don’t want the price to go too low clearly, because their economies wouldn’t stand it,” Neil Atkinson, head of the oil industry and markets division, at the IEA told CNBC Friday.
“But if the price goes too high then that’s going to attract a lot of investment in other parts of the world, principally the U.S. shale producers,” Atkinson added.
The six-month agreement had its first test in January. Analysts are watching closely whether OPEC and non-OPEC members stick to their commitments. A large number of oil experts do not expect 100 percent compliance.
According to Atkinson, so far, “they’re doing quite well.”
“The signs are quite encouraging that production has been cut back quite significantly in January,” he added.
A Reuters survey, published this week, showed at the end of January OPEC members cut production by 958,000 barrels per day, equating to an 82 percent compliance of what they initially pledged.
Brent crude was trading at $56.94 a barrel on Friday morning, while WTI was being sold at $53.95 a barrel.
