OPEC increases its production and spares the cabbage and the goat

Oil prices recovered on Thursday, after the meeting of the Organization of the Petroleum Exporting Countries (OPEC 13 members) and their allies (OPEC+ 10 partners), which decided to accelerate the increase in their total volume of production for July to be delivered in August.

So after months of waiting (Spring 2021) and despite soaring prices, the 23 member countries of OPEC and OPEC+ have finally, we would say, agreed to adjust July production “up by 648,000 barrels per day”, instead of the 432,000 barrels/d of the previous months. OPEC and its ally (OPEC+) are thus ending their production cuts. But the increase in this production over the next two months should not significantly compensate for the shortage of Russian oil “sanctioned” by the West (agreement Monday between the United States, the United Kingdom and the leaders of the EU to reduce their imports of Russian oil by some 90% by the end of the year).

But the problem is that many members of the group (OPEC and OPEC+) have reached their production capacity. Effective increases will therefore be smaller and the group’s spare capacity will continue to decline, experts note

The announcement of the embargo on most Russian oil has increased fears of shortages and visibly changed the situation for the cartel, which stresses “the importance of stable and balanced markets”. The increase in production is distributed proportionally between each of the members, with identical objectives for Moscow (OPEC+) and Ryad (OPEC), the two pillars of the alliance which pumps around half of the world’s oil and which since 2016 have been consulting each other. to adjust their supply and regulate oil prices.

However, the increase decided on Thursday, even if it is larger than expected, should not significantly relieve a market in need of Russian oil. Also prices should remain at a high level. This is what is called sparing the goat and the cabbage, the main target Russia can leave satisfied.

Indeed, OPEC+ led by Russia has somewhat loosened some ballast in the United States and Europe, including the United Kingdom, but without too much damage on the merits and has been able to preserve the unity of the alliance. . The Russian Federation is also avoiding the promised sidelining because OPEC+ has remained united. Following the announcement of the alliance’s decision, prices that were in the red earlier in the session recovered.

An announcement that we suspect, delighted investors: crude oil prices rose by almost 1%, the two crude oil benchmarks fluctuating around 116 dollars a barrel. It is true that the Gulf economies derive juicy profits from a barrel well over 100 dollars: Saudi Arabia thus recorded in the first quarter its strongest growth in ten years.

Despite these more ambitious quotas, OPEC+ will not be able to replace all the volumes lost from Russia due to the difficulties of some of its members in reaching their objectives, analysts warn. In the meantime, the shortage which is causing prices to soar almost everywhere is mainly impacting Africa, which is leaving its countries dangerously short of fuel supplies, even disrupting airlines in certain regions and causing monster queues in the gas stations.

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