BAKU, Azerbaijan, Sept.29
By Leman Zeynalova – Trend:
OPEC+ will very likely face some strong pressure from large oil-consuming countries to put more oil on the world market amid higher oil prices, Francis Perrin, Senior Fellow at the Policy Center for the New South (PCNS, Rabat) and at the French Institute for International and Strategic Affairs (IRIS, Paris), told Trend.
“The price of North Sea Brent for November 2021 contracts closed at $79.09 per barrel on 28 September in London. During this day Brent exceeded $80/b for the first time since 19 October 2018. West Texas Intermediate (WTI) closed at $75.29/b yesterday in New York,” he said.
Perrin noted that the rise in oil prices is the consequence of the strong world economic growth in 2021 after the recession of 2020.
“According to OPEC, the International Energy Agency (IEA) or the U.S. Energy Information Administration (EIA) world oil demand will increase by 5 to 6 million barrels per day this year. At the same time there are supply constraints: OPEC+ countries are increasing their production but their collective output remains much lower than before May 2020; oil stocks in OECD countries are falling and are below their most recent 5-year average; the production in the U.S. part of the Gulf of Mexico remains lower than before the hurricane Ida at the end of August; U.S. oil stocks are falling over the past few weeks; and some producing countries, such as Libya, Nigeria or Mexico, are facing some unforeseen problems with a negative impact on their production. The gas supply crunch is also contributing to the increase in oil prices as there is some substitution of oil to natural gas due to fast-rising gas prices,” said the expert.
He pointed out that the 23 OPEC+ countries will meet on 4 October and they will clearly consider this evolution.
“They will very likely face some strong pressure from large oil-consuming countries to put more oil on the world market. During the summer Jake Sullivan, President Biden's national security adviser, publicly said that OPEC+ was not doing enough to support the world economic recovery and that the U.S. had spoken with Saudi Arabia, the United Arab Emirates and some other countries about this issue. Other Western countries but also China and India could also raise the same concerns (India did it in the past). OPEC+ will probably maintain its July 2021 decision, which is to increase its production by 400,000 b/d each month, but there could be some heated discussions within this group of oil countries,” noted Perrin.
He believes that it is a little too early to speak about a $100/b oil price, even if it is not impossible, but the $90/b mark could be reached by the end of 2021.
“Goldman Sachs thinks that it is very likely. There is yet an upward potential in the oil market due to this unbalance between world oil demand and supply but some bearish aspects are also present such as the concerns about China's economy further to the problems of Evergrande, a rising dollar, a rising inflation and a possible reaction of some central banks in terms of interest rates and monetary policies, which could have a bearish impact on the world economy,” the expert concluded.
---
Follow the author on Twitter: @Lyaman_Zeyn