BAKU, Azerbaijan, Sept.1
By Leman Zeynalova – Trend:
OPEC+ should deal with uncertainty, while not undermining its market position, Cyril Widdershoven, a Middle East geopolitical specialist and energy analyst, a partner at Dutch risk consultancy VEROCY, and Global Head Strategy Risk at Berry Commodities told Trend.
OPEC+ is going to increase oil output by 400,000 barrels per day starting from September. But today OPEC will hold a meeting during which Kuwait proposes to stop increasing the oil output noting that due to the fourth wave of COVID-19, OPEC+ should be cautious.
“As the market is still in a flux, with no signs of any real direction due to COVID and possible new waves worldwide, the main issue that OPEC or OPEC+ should be asking themselves is how to deal with uncertainty, while not undermining its position in the market. Based on the current price levels of crude oil globally, main point to be taken is that a continuation of the stated oil export increase is largely the best option,” he said.
Widdershoven noted that the market has been counting this already in, as seen in some lower price levels, so stability is key.
“Also for future demand, it won’t be very strong to have OPEC+ react to any new developments with COVID as this could be perceived as fear. By bringing in additional oil, price levels will stay on the same levels right now, even if potential demand is going to increase. Where people should be having a keen eye on is that EU countries economic growth projections are skyhigh, which means demand is going to be higher for sure.
Where the current supply surplus discussion for 2022 is based on is still unclear, main economic figures are showing strong or very strong economic growth worldwide, with even main Asian countries back in play. The impact of major new COVID waves will be lower than before, as vaccination levels are increasing. Additional oil production of non-OPEC is still below expectations, so to expect that there will be a new oil glut is not very realistic. At price levels of 65-75$ per barrel pressure is still on. Ongoing divestments by IOCs are also not going to be supporting very strong supply growth scenarios,” added the expert.
At the 19th meeting of the ministers of the member countries of the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC countries, the participants supported the decision to extend the "Declaration of Cooperation" until the end of 2022.
The new agreement calls for a reduction from 5.8 million barrels in OPEC + countries to 2 million barrels by the end of 2021.
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