One expert sees downside risk to oil, now that OPEC has decided to maintain its production target of 30 million barrels a day. Jamie Webster, Senior Director for Global Oil Markets at IHS says over the next couple of months, there’s more downside risk to prices, which he believes could fall into the upper $50 a barrel range. He said the recently drift higher in prices could re-incentivize U.S. shale producers to increase production, which would then put pressure on prices. Webster sees demand growth this year at 1.3-million barrels a day, more than double last year’s numbers, but demand isn’t strong enough to overwhelm excessive supply. He sees strong demand for oil within the United States, and ‘sizeable demand growth’ within China. He noted that OPEC’s recent decision was similar to what it did in November, when members decided to roll over their production target. Webster noted that ‘there’s a recognition that there’s still a lot of threats in terms of their market share globally and internal to the organization, there’s a recognition that Iran might come back, or Iraq production might come back, so at this point there’s no politically consensus to be able to move to any sort of different production target.’ Webster says even if oil prices start to fall, it would still be difficult for OPEC to make any sort of production change, and generally OPEC is always a very reactive organization.
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