Organization of the Petroleum Exporting Countries (OPEC) had a meeting with representatives from Russia and other allies on July 1 to discuss options for better oil price adjustment.
|OPEC+ is expected to consider adding between 500,000 and 1 million barrels of oil per day. Photo: AFP|
Analysts said that OPEC, Russia and its allies (referred to as OPEC+ for short) are expected to consider adding between 500,000 and 1 million barrels of oil per day. However, it is still possible that this group will not increase production. If this happens, oil prices could climb steeply in the near term.
Earlier, Reuters reported, an internal OPEC report indicated that the oil market could fall into a glut after the group overturned its decision to cut output by 6 million barrels per day in April 2022. .
Information about OPEC’s internal report made oil trading on June 30 increase in price. The price of Brent crude oil for delivery futures traded at over $75/barrel while the price of WTI crude oil for August delivery was below $74/barrel, the highest level since the fall of 2018. Other reasons for oil prices On June 30, the increase in the US petroleum inventory data was lower than expected.
“This is their (OPEC+) most important meeting in more than a year. They saw the serious situation when oil prices were negative last year, and they had a meeting to discuss it,” said John Kilduff. , an analyst from investment consulting firm Again Capital said. “The plan will be to increase production by 500,000 barrels per month and I think they will stick to this plan. It works for them because oil prices will continue to go up,” added John Kilduff.
OPEC is expected to consider extending its current output agreement before it ends in April 2022. Analysts have high expectations that OPEC will pump 500,000 barrels back into the market in August.
“For me, the interesting story is that if they get through the current cuts, then [giá] How high will it be? Potential options are being discussed,” said Helima Croft, Head of Global Commodity Strategy at RBC Global Investment Bank.
Helima Croft said that the oil market has fixed prices with a scenario where production increases by 500,000 bpd and if production is adjusted higher than expected, oil prices will slide slightly. This female expert assessed, OPEC + has become more flexible since the Covid pandemic appeared and this group can quickly adjust output when it perceives major factors affecting the market.
For example, the US and Iran discussed a new nuclear agreement. If this happens, Iran could pump back at least 1 million bpd into the market. The path to doing this is still questionable and the oil market still needs to be pumped with OPEC’s current production levels by the end of the year, if an agreement is to be signed.
“OPEC has moved like a warship. We’ve seen meetings every two years. In the time of Covid, it was difficult to convene OPEC,” Ms. Croft said. This female expert said that OPEC currently operates like the US Federal Reserve (Fed) with regular meetings on policy adjustments. “It means they really have control over the direction of the market,” Ms. Croft emphasized.
In fact, OPEC, led by Saudi Arabia, has had monthly meetings starting this year when the oil market was in a state of excess. OPEC Secretary General Mohammed Barkindo said on June 29 that OPEC estimates oil demand will increase by about 6 million bpd this year, of which 5 million bpd will increase again in the second half of this year.
“Now with their monthly meeting structure, they (OPEC) are more like a speedboat than a battleship. If the Delta variant really sabotages demand in key geographies, they could reverse direction,” said Mrs. Croft.
Big changes in the market have also changed OPEC, which cut production sharply last year due to both demand and plunging oil prices.
Meanwhile, the pressure from US shale oil producers on OPEC also eased when the US politics and the country’s oil market had a significant change.
Incumbent US President Joe Biden’s administration is more focused on responding to climate change and developing renewable energy. Before that, under former President Donald Trump, the US oil industry grew stronger and less controlled. At that time, the United States was the largest oil producer in the world.