Oil to edge higher in 2018 as OPEC cuts help to offset supply growth

Oil workers are seen at an oil field in Venezuela this week. The price of crude is expected to rise steadily this year but remain in a tight band dictated by US shale output according to a new survey of analysts. (Reuters)
Updated 28 February 2018
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Oil to edge higher in 2018 as OPEC cuts help to offset supply growth

BENGALURU: Oil analysts expect the price of crude to rise steadily this year but remain in a tight band dictated by US shale output growth on one side and OPEC supply restraint on the other, a Reuters poll showed on Wednesday.
The survey of 37 economists and analysts forecast Brent crude would average $63 a barrel in 2018, slightly higher than the $62.37 projected in the previous month’s poll.
“OPEC’s level of compliance (with agreed production curbs) and the pace of US shale’s output growth are likely to be the key fundamental price drivers in 2018,” Ashley Petersen of Stratas Advisers said.
“Prices will likely be more volatile in 2018 than 2017, driven by whipsawing sentiment around the pace of US growth.”
US oil production could surpass 11 million barrels per day this year, with production already near a record above 10 million bpd.
“The US has stolen the show somewhat,” said Cailin Birch, an analyst at the Economist Intelligence Unit.
“That its oil market is dominated by a large number of uncoordinated, private-sector firms, many of whom benefit from lower production costs than producers elsewhere, means the US will remain a major player for the foreseeable future.”
Meanwhile, OPEC is closing in on its goal of reducing oil inventories held by industrial nations to their five-year average, figures from the group’s head of research showed this month.
OPEC and non-OPEC producers led by Russia have agreed to cap output by about 1.8 million bpd in a deal running from January last year until the end of 2018.
Saudi Arabia last week said it hoped OPEC and its allies would be able to relax production curbs next year and create a permanent framework to stabilize oil markets after the deal expires.
“The supply deal remains a key uncertainty for the oil market. A transition of the deal is needed but not yet visible, with both an over-tightening and an orderly unwinding being potential scenarios,” said Norbert Rucker, head of commodity research at Swiss bank Julius Baer.
Analysts said that without a smooth exit from the pact, global inventories may drop sharply and trigger a potentially damaging price rise.
Oil output in Venezuela, one of OPEC’s larger producers, has dropped to its lowest in more than 20 years as the country grapples with an economic crisis, in turn helping curtail OPEC’s supply beyond the group’s agreed 1.2-million bpd commitment.
Growing demand from Asian economies, led by China, was expected to absorb part of the increase in US supply.
“Rising global oil demand will be driven mainly by emerging markets, with non-OECD consumption rising by an average of 2.8 percent per year in 2018-19, which would be the fastest rate since 2013,” the Economist Intelligence Unit’s Birch said.
US light crude is forecast to average $58.88 a barrel in 2018, up from $58.11 in the January poll.


Flight rights group takes Ryanair to court over strike compensation

Updated 15 August 2018
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Flight rights group takes Ryanair to court over strike compensation

  • Ryanair had to cancel around 1 in 6 flights last week due to a walk-out by pilots in five European countries
  • The disruption affected 55,000 travelers

BERLIN: German passenger rights company Flightright is taking Ryanair to court over whether it should pay financial compensation to passengers affected by strikes at Europe’s largest low-cost carrier.
Ryanair had to cancel around 1 in 6 flights on Friday due to a walk-out by pilots in five European countries, disrupting an estimated 55,000 travelers.
The worst affected country was Germany, where 250 flights affected around 42,000 passengers.
EU rules state that passengers can claim monetary compensation of up to €400 for flights within the region for canceled or delayed flights, unless the reason is extraordinary circumstances, such as bad weather.
Strikes have generally fallen under extraordinary circumstances although a ruling by the European Court of Justice in April said that a wildcat strike by staff at German airline TUIfly following a restructuring could not be classed as extraordinary circumstances. Flightright said it believes Ryanair is therefore obliged to pay monetary compensation to customers and so has filed a complaint with a court in Frankfurt in a bid to clarify the rules around strikes.
A spokeswoman for the court said she was aware of the Flightright statement, but that she had not yet seen the complaint.
Ryanair said it fully complies with the European legislation on the matter, known as EU261.
“Under EU261 legislation, no compensation is payable when the union is acting unreasonably and totally beyond the airline’s control. If this was within our control, there would be no cancelations,” a spokesman said.
Passenger rights groups such as Flightright help passengers to claim compensation from airlines under EU261 rules but in exchange for a share of the compensation received.
Many European airlines, including Ryanair, therefore urge passengers to file claims with them directly instead.