Fears of closures worry the oil market (Ygor Aliev/Getty)
organization agreed OPEC And its allies (OPEC +) to adhere to the gradual monthly increases in oil production after a short video conference, but the oil market is still floundering in light of the indicators of uncertainty that dominate the path of recovery Economic Globally, especially with the increase in cases of coronavirus and the return of closures in a number of countries.
The ministers approved an increase supplies of 400,000 barrels per day scheduled for October after less than an hour of talks, one of the fastest meetings in recent memory and a stark contrast to the lengthy negotiations that took place in July, according to Bloomberg. And the administration of US President Joe Biden exerted extensive pressure during the past days to expand production increases, and after OPEC + announced its decision, the White House expressed his happiness, pledging to urge more to support economic recovery, according to Reuters. “We are pleased that OPEC has continued the gradual increases in oil production as it agreed to increase production in July,” a White House spokesman said.
“We are communicating with OPEC+ members about the importance of competitive markets in setting prices and doing more to support the recovery,” he added. The market did not catch the OPEC + step as a catalyst for raising prices, as the latter witnessed a decline Thursday morning, reinforced by doubts about the rise in oil demand with the increase in Corona virus infections around the world, while many American refiners, a major source of demand for crude, remained suspended from work. Because of the aftermath of Hurricane Ida.
Refineries will take weeks to resume operations. The US marine energy regulator said energy companies are rushing to restart platforms and pipelines in the US Gulf of Mexico, while production of about 1.4 million barrels per day of oil is still suspended. However, another factor entered the price line to raise it in the afternoon, affected by the report of the US Energy Information Administration on crude stocks, which fell by 7.2 million barrels.
In this context, said Christian Malik, Head of Oil and Gas Division at J. P. Morgan Chase, in an interview with Bloomberg TV that “OPEC has proven once again that it can meet and do things smoothly.” “It is likely that Harmony will be used to respond flexibly to any further shifts in the market over the next year.” While conditions may seem favorable for the cartel at the moment, doubts loom, as even as demand has recovered, the market has been widely affected by the emergence of new types of coronavirus.
Likewise, the question of whether Iran and the United States will conclude a deal to lift sanctions on oil exports to the Islamic Republic, which currently seem less likely, is also pending, with repercussions on the market. “What is uncertain, is whether demand will be able to grow as quickly as expected by OPEC + and the market, given the risk of new closures to combat Corona mutants spread.
The Organization of the Petroleum Exporting Countries (OPEC), most notably Russia, is working to undo the unprecedented production cuts that were implemented in light of the Covid-19 crisis last year. About 45 percent of the disrupted supplies have already been revived, and in July the group put in place a plan to gradually bring the rest back until September 2022. With crude oil prices mostly recovering from the slump in mid-August and a relatively tight supply outlook for the rest of the year, no The 23-nation coalition had good reason to change the schedule for gradual monthly increases in supply.
There was some skepticism about the plan when oil markets fluctuated over the summer as the spread of the virus threatened demand. But fuel use has proven resilient, with total oil products supplied in the United States rising to a record high in late August, according to some analyzes.
And OPEC + said in a statement that “while the effects of the Covid-19 pandemic continue to cast some uncertainty on the paths of economic recovery, the fundamentals of the oil market in terms of demand have strengthened, which indicates an acceleration of recovery.” And “Bloomberg” information indicated that the group will meet again in Oct 4 to study market changes.Data presented to ministers revealed a new challenge for Saudi Arabia and its partners in 2022. Markets were expected to return to surplus next year, with an average oversupply of 1.6 million barrels per day.
However, projections assume that the group will regain approximately 6 million barrels per day of production, as many countries may struggle to reach their full targets. The volume of crude oil production that OPEC+ is theoretically shutting down depends on questionable numbers. Russia has an inflated baseline much higher than pre-pandemic output. Some of the other members have outdated energy numbers, with countries like Angola and Nigeria already struggling to achieve the supply increases allowed under the agreement, according to Bloomberg.
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