Positive Oil Forecasts Create Disincentive for OPEC to Cap Production

Recent forecasts for rising oil prices are producing a disincentive for the Organization of Petroleum Exporting Countries (OPEC) to cap production at their upcoming meeting in Vienna this week, UAE Ambassador to the United States Yousef Al Otaiba told Sputnik on Tuesday.

WASHINGTON (Sputnik) — The latest short-term energy forecast by the US Energy Information Administration estimates oil prices will continue to rise, averaging between $42 and $44 per barrel through the end of 2016. Oil prices dropped significantly in the past 18 months from a high of $110 in 2014.

"I think as oil prices continue to go up, there will be less incentive for OPEC to actually get anything done," Otaiba said, noting that with oil prices rising, OPEC members "will feel there is even less need for a cap."

Oil prices have rallied back to approximately $50 per barrel ahead of the OPEC meeting scheduled for Thursday in Vienna, Austria. For the past three months, oil forecasts have tended to be positive, indicating traders’ confidence prices will continue to rise.

"I think they [OPEC] will be more inclined to act if oil prices are lower," Otaiba said of his expectations for the upcoming Vienna summit. "So as long as prices go up, I think there is less of an incentive for OPEC to actually cap."

The persistent low oil prices and market instability led to an April meeting of OPEC and non-OPEC oil producers in Doha to discuss a possible freeze on oil output. The meeting failed to produce an agreement as OPEC members were sharply divided over capping their own production.