Brent crude will be lower by the end of the year as production is set to increase from Iraq and Iran, shale oil output stabilizes while demand slows, according to OPEC’s former head of research.
Brent will trade between $40 to $50 a barrel in the fourth quarter, Hasan Qabazard, who was research head from 2006 to 2013, said in an interview in Vienna. That compares with Wednesday’s close of $63.80 and the lower end of the range is below the price at which the benchmark bottomed in January.
Oil climbed 11 percent this year on signs of more demand and speculation of reduced U.S. supply as OPEC maintained output to crowd out higher-cost producers. Qabazard’s outlook for a renewed decline follows bearish forecasts from banks including Goldman Sachs Group Inc., which said last month the rally was premature and Brent would drop to $51 in six months. The end of the U.S. driving season will mean slower demand, Qabazard said.
“The fourth quarter is going to be a real test,” Qabazard, who’s now chief executive officer of Kuwait Catalysts Co., said on the sidelines of an OPEC seminar on prospects for the oil industry. The meeting was attended by chief executives from Exxon Mobil Corp. to BP Plc and Royal Dutch Shell Plc and oil ministers from Saudi Arabia to Kuwait and United Arab Emirates.
Brent for July settlement rose 3 cents to $63.83 a barrel at 12:33 p.m. on the London-based ICE Futures Europe exchange. The European benchmark dropped to a low of $45.19 on Jan. 13, and averaged $58.64 this year.
“There is a serious oversupply in the market,” Iran’s Oil Minister Bijan Namdar Zanganeh told reporters in Vienna on Thursday.
Brent’s recovery from the six-year low in January is stalling on signs a global glut estimated by Venezuela at 2 million to 2.5 million barrels a day will persist. OPEC ministers will convene in Vienna on Friday to discuss policy.
Zanganeh said he’s delivering a letter at the meeting alerting OPEC to make room for a rise in the country’s output. Shell CEO Ben Van Beurden and BP CEO Bob Dudley said they are interested in investing in Iran if sanctions related to its nuclear energy program are removed.
OPEC will keep its production target unchanged when the ministers gather, according to a Bloomberg survey last month. The 12 members including Iraq and Iran pumped 31.58 million barrels a day in May, exceeding the 30-million barrel target for a 12th consecutive month, data compiled by Bloomberg show.
Prices are attractive for non-OPEC producers to keep drilling, Qabazard said. U.S. shale oil output is now steady at about 4 million barrels a day, and will grow to 5 million barrels a day by 2018, he said.