Economists Optimistic Oil Price To Sustain At US$35-Us$45 Per Barrel

By Mohd Khairi Idham Amran KUALA LUMPUR, April 19 (Bernama) -- Economists are optimistic that the oil price can sustain at US$35-US$45 per barrel level this year based on encouraging demand despite major producing countries failing to agree on an output cap. Global benchmark Brent crude was down almost four per cent this morning to US$41.38 per barrel after a meeting of nearly 20 major oil producing countries yesterday. The meeting, which included the Organisation of the Petroleum Exporting Countries (OPEC) members and non-OPEC members, failed to agree on an output cap as Iran was absent from the meeting. Malaysian Rating Corp Bhd Chief Economist, Nor Zahidi Alias, said the negative outcome from the meeting would naturally weighed on global oil price in the short term but the medium-term outlook remained positive. "Although the supply factors remain unfavourable, the demand side does not look too bad. I still believe that the US$35-US$45 per barrel will remain intact for this year," he told Bernama on Monday. He said the estimated level of oil price was still higher than the government's forecast of between US$30 and US$35 per barrel announced at the Budget 2016 recalibration in January. "The higher oil prices will definitely be positive for Malaysia's fiscal position. To a large extent, the Malaysian budget deficit hinges on oil prices although the dependency is getting less," he said. Economists have also reached a consensus that the negative outcome from the meeting would not cause the oil price to fall sharply as the initial agreement from the countries that attended the meeting was seen as an upside potential. In February, major oil producers, including Russia, Saudi Arabia, Qatar and Venezuela, agreed to freeze output if other countries like Iran would join them. An oil and gas analyst from MIDF Research said the initial collective agreement between oil majors was a positive indicator for oil prices going forward regardless of the outcome of yesterday's meeting. He said the oil majors could find an agreement in the next OPEC meeting, scheduled on June 2, given that Iran received economic support from other members. "The meeting opens up opportunities for discussions among major producing countries and maybe in June, Iran will agree," he said. Iran's absence from the meeting was due to the country's ambition to ramp up production by one million barrels per day (bpd) to 3.9 million bpd, the level it produced to the sanction in 2007. As of last month, Iran produced on average of 3.3 million bpd, which was 450,000 barrels higher compared to its production in December last year. --BERNAMA