In this article, we will explore the current dynamics of global oil markets and analyze the current impacts on oil prices and future forecasts. We will also address the major powers and internal events within OPEC and the associated alliances. We will discuss the impact of the decision to postpone the OPEC+ ministers’ meeting and the fluctuations of oil prices. We will also examine the effect of increased production by non-OPEC+ producers and the predictions for global oil demand in the future. Additionally, we will talk about the accumulation of global oil inventories and their effect on the markets. Finally, we will touch on the potential decisions that OPEC+ may take in the future and their impact on the market.
Postponement of OPEC+
Analysts were alerted when OPEC and its allies decided to postpone their ministerial meeting to November 30, coinciding with the start of COP28 meetings in Dubai. This announcement led to a drop in oil prices from above $82 per barrel to over $78, but they quickly recovered to the range of $81-82 per barrel. Prices saw another decline over the weekend. Brent crude contracts were down by 91 cents to $79.67 per barrel by 12:17 PM GMT on Monday.
Major Powers and Internal Events in OPEC
It is important to understand that the decision to cut oil production by 2 million barrels per day, agreed upon during the OPEC+ meeting at the beginning of June this year, will continue until 2024, which should provide some degree of comfort to the markets. However, markets tend to focus on short-term drivers rather than long-term realities. Hence the old saying: buy on rumor and sell on fact, which can sometimes be reflected in oil markets.
Impact of Increased Production and Inventory Accumulation
The markets have been weak not due to demand but because of increased supplies from non-OPEC+ producers such as the United States, Brazil, Norway, and others. In fact, while both OPEC and the International Energy Agency have agreed that global oil consumption will grow by 2.4 million barrels per day this year, they significantly differ for the following year, with OPEC predicting growth of 2.25 million barrels per day next year while the International Energy Agency expects 930,000 barrels per day. This disparity, coupled with rising crude oil production from non-OPEC+ producers, is enough to sow doubts about the positive markets.
Future Outlook and Potential Decisions
Global oil inventories have built up over the past two months. In the United States, inventories showed their lowest level in 2023 in September and then increased significantly over five of the last six weeks. The increase in inventories is also not a sign of positive markets.
Given the current state of oil markets, most analysts assume that the additional voluntary cut of 1.3 million barrels per day by Saudi Arabia and Russia will continue next year. There may even be additional cuts across OPEC+. We will gain clarity on this next Thursday when OPEC+ ministers review the data and decide on the path they will take.
Internal Events in OPEC
In June, the baseline values for African oil producers – particularly Nigeria, Angola, and the Congo – were revised to reflect their actual production capabilities. The Africans were not pleased with this decision, but Nigeria and Angola agreed to a review mechanism by independent consultants Rystad, Wood Mackenzie, and S&P. Informed sources indicate that a consensus will be reached on November 30.
This leaves us with an oil market experiencing higher-than-expected production from non-OPEC+ members and questions surrounding the direction of the global economy and oil consumption next year.
In
At the same time, we must acknowledge that OPEC+, which faced criticism last June for its production cut decisions, was right. If there had been no OPEC+ measures to reduce production, the oil markets would have been more volatile over the past six months. We must also recognize that Saudi Arabia bore the main burdens by shouldering an additional voluntary production cut of 1 million barrels per day.
• Cornelia Meyer is a macroeconomic expert and energy specialist and the CEO of Meyer Resources, a consulting firm. Disclaimer: The opinions expressed in this section are those of the author and do not necessarily reflect the viewpoint of Arab News.
Source: https://www.arabnews.com/node/2416241
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