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THE message sent by 23 members of OPEC+ in anticipation of the expected visit of the US President to the Gulf region this month is very clear. It affirms that there is neither any extra volume of oil available nor any ability to increase the oil production. We also cannot displease our strongest ally outside OPEC, which is Russia.
It was our ally who helped in stabilizing the oil prices, with regular consultations that resulted in keeping the world supply intact, even if we had the volume, but luckily we all don’t have it.
Despite its scheduled monthly increase of 650,000 barrels last month and next, in reality the overall outcome is less volume and not more. The overall reduction or lack of supply amounts to more than three million in May of its total 42 million barrels of production.
Nigeria and Angola are unable to meet their production targets and its future levels constantly along with other members.
The US administration is to be blamed for frightening and warning against oil and gas investments and favoring greener energy. This forced the oil companies’ shareholders to vote and almost abandon any sort of investments in the core business and take advantage of the cash flow for some time to come.
Not only this, as a result, consuming nations are pushing and producing more coal than before and re-opening the old wells, despite coal being the No. 1 enemy of the environment. China, India, Europe, and the USA are using more coal to avoid any sort of shutdowns of their industries and to avoid hurting the householders by any means.
It has taken OPEC too long to bring harmony, stability and unity to the oil market. It is neither ready nor prepared to harm and destroy its relationship with Russia. It is prepared to add more oil but not at the expense of causing any harm to its oil ally.
Last month, the main Gulf producers produced less volume than expected. Saudi Arabia was less by 100,000 barrels of the promised 275,000 barrels per day. Kuwait, Saudi Arabia and Emirates together added about 130,000 barrels while the volume of Iraq was down by 100,000, Libya by 180,000, and Nigeria by 85,000 barrels per day last month.
Now, the USA has to ease the pressure on oil consumers either by reducing taxes on gasoline or digging deep into its oil strategic reserve by bringing more oil, in order to help ease the supply situation. It might not be of great help as USA refineries are running almost at full capacity but it is still good psychologically for the aspect of public relations to ease the oil market tensions.
Since OPEC+ is out of supply, including the two potential candidates of the Arabian Gulf suppliers, there are some that are available and ready. One is Iran with a volume of about 1.4 million barrels, and the other one is Venezuela. Both are in need of hard but delicate diplomatic negotiations. Since it is rooted in USA foreign policy, the administration has to deal with them, and leave OPEC+ out of this matter.
For sure, the oil producing countries are raising the white flag of surrender.
Sorry Mr. President, no more oil is available globally at present.
By Kamel Al-Harami
Independent Oil Analyst