"Oil producers rejoice! Finally, the end seems to be in sight for one of the worst global oil glut in history," the article read.
The article referred to Phil Flynn, senior energy analyst at PRICE Future Group, who said oil prices would reach $70 a barrel by July 2016.
The first reason is that US oil companies are finally cutting output, after months of job cuts and slashes in budgets. According to Flynn, US daily oil production could drop from nine to eight millions barrels by this summer.
He underscored that even if oil prices rise over the next few months, US companies will not be able to "head back into the oil fields and tap into new wells."
In addition, oil firms have already cut project spending and a number of companies are expected to declare bankruptcy this year.
Despite the fact that not all of those countries have good diplomatic ties, Flynn believes that oil is of greater importance in the current environment.
"Everybody is on their knees right now," Flynn says. "Nobody can afford to play this game anymore."
According to an article on the website Oil Price, a meeting between Russia, Qatar, Saudi Arabia and Venezuela on February 16 was the first step for Moscow to take the lead in forming a new oil cartel. During the next meeting, in mid-March, Russia may further strengthen its leadership.
Until the dawn of the current oil crisis, Saudi Arabia controlled the global market. However, US shale producers entered the market when prices were high enough to warrant the high price of its extraction. Since then Riyadh’s position has weakened. The Saudis are now seeking for new allies in the Gulf. Despite tensions over the Syrian conflict, the drop in oil prices has paved the way for Russia and Saudi Arabia to become allies.
"Now, with Russia stepping in to negotiate with OPEC nations, a new picture is emerging. With its military might, Russia can assume de facto leadership of the oil-producing nations in the name of stabilizing oil prices," according to Oil Price.
"Russia has been in the forefront of plans to move away from Petrodollars, and Moscow has formed pacts with various nations to trade oil in local currencies. With this new cartel of ROPEC (Russia and OPEC nations), a move away from petrodollars will become a reality sooner rather than later," it added.
After anti-Iranian sanctions were lifted Tehran announced that it would re-enter the global oil market. The move motivated many oil producers across the world to keep pumping oil at record paces to keep their market share.
But now with Iranian oil ready to hit the market, he "problem is that companies don’t have the money to invest. Production increases in Iran will be slower than expected," Flynn said.
Finally, an economic slump in China, the world’s largest oil importer, is not actually hurting the oil market as much as anticipated. The initial fear was that China’s demands for fuel would decrease and there would be a meltdown in Chinese markets. However, "we’ve seen some stability in the Chinese market and even though demand is questionable, imports have stayed near record highs," the analyst noted.
Nevertheless, there is still the possibility that the Chinese economy will sink deeper into depression and demand for oil will plummet.
"If the wheels come off the Chinese economy, all bets are off," Flynn warned.
