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MANY players are in the oil market with no clear direction of where it is going. The US administration is encouraging more oil drillings, and seeking cheaper oil for the US consumers, while promising the release of one million barrels of oil daily for the next six months. The International Energy Agency is meeting to ensure the release of more oils into the global market.
Every country is doing its bit to release more oils for calming down worries related to supply. OPEC+ met last week to discuss the increase of oil output by 432,000 barrels per day from May 2022. However, the same organization is not meeting its obligation of the fixed amount of 300,000 barrels per day. An average shortage of more than 800,000 barrels per day was witnessed in the last four months, thereby not meeting its minimum obligation.
The fear of losing three million barrels of Russian oil is the main factor for the oil-consuming countries to cope with any shortage in the short time. Meanwhile, Russia is pushing for payment in its own currency against selling gas to its historical customers that have taken a stand against invasion of Ukraine. So far, no action has been taken, and gas is still fl owing. Many elements are moving in different directions without a single clear denominator.
China is shutting down Shanghai due to the eruption of the second wave of COVID-19, which is cooling down the oil prices. On the other hand, Russia, through its energy minister, stated that oil prices could reach $300 per barrel. This could happen if it shuts down or curbs its production of the famous three million barrels due to any technical reason to do so. OPEC+ is not taking any side and doesn’t want to get involved in politics.
However, Iran, which is one of its founders, is at odds with its other colleagues in OPEC. Russia, on the other hand, is talking of a cost of $ 300 per barrel. This could end up in sides being taken, which could deprive the world of additional barrels of oil, and non-adherence to the commitment to monthly quota. No wonder there are too many elements leading to uncertainty in the oil market and its direction.
By Kamel Al-Harami
Independent Oil Analyst