The oil market needs to be stable in order to prevent economic hardship, the oil producers' cartel OPEC said in its most recent World Oil Outlook (WOO) report, while investors eagerly await the outcome of the organisation's November meeting. Scoured for clues The 14-member OPEC group pledged, in their last meeting in Algiers, to cut oil production by as much as 2 percent. The latest WOO report will be scoured for clues as to whether or not OPEC will stick to their promise. Critics have raised questions as to just how likely it is the cartel will indeed seek to curb output in its meeting on November 30th as the details of how much they will cut oil production by, and which countries will act, remains absent. Oil prices recorded a weekly percentage decline last week not seen since January with Brent crude hitting $45.08 and WTI slumping to $43.57. However, on Monday, oil prices were seen to rebound after OPEC secretary general, Mohammed Barkindo underlined the group's intention to reach an output deal at the end of November. Investment across entire industry Barkindo stated in the WOO report that given the current demand and supply outlook for oil, significant investment across the entire industry is necessary. He goes on to say, "While the recent oil market environment has been one of oversupply, it is vital that the industry ensures that a lack of investments today does not lead to a shortage of supply in the future." In OPEC's 10th WOO edition, the group cites numerous uncertainties ahead when projecting how oil is likely to perform through to 2040 though does anticipate the commodity is to remain the fuel with the largest market share for most of this period. The report forecasts that assuming the OPEC Reference Basket (ORB) price for 2016 continues to be around $40 a barrel then a price recovery of $5 a barrel per year through until 2021 is expected. This would result in an oil price of $65 a barrel after five years. Market belief has 'collapsed' When it comes to supply, the OPEC report predicts non-OPEC supply to initially fall in the coming year before increasing up until 2021. It all means that OPEC will be required to meet most of the additional long-term oil demand," the report's foreword said. "In terms of crude, it is expected that OPEC will have to supply an additional 8.9 mb/d (million barrels a day) between 2015 and 2040." Not everyone is convinced that OPEC will seek to tackle oversupply by cutting reduction on November 30th as David Hufton, managing director of PVM Oil Associates, told Reuters, "Market belief that OPEC can reach a credible deal has collapsed and prices are now $8 a barrel off the post-Algiers highs. "The numbers show that the best deal OPEC are likely to come up with is well short of what is needed to achieve a balanced market in 2017," he added. International dialogue imperative Perhaps the most notable challenge for OPEC comes in the shape of the Paris COP21 agreement. The historic climate change deal adopted by almost 200 countries last December came into effect on Friday. The WOO reports that renewable energy sources as well as nuclear energy will increase in market share regardless of how quickly the COP21's objectives are achieved and this would partially offset the loss in demand for fossil fuels. OPEC concludes the report by indicating that given the countless uncertainties that the organisation is likely to face, it is imperative that it continues to participate in international dialogue. Source: CNBC
