OPEC+ can’t meet all the required world demand
The administration that has been calling on OPEC to reduce oil prices for two months when the oil price was close to $65 is the same that is causing havoc and instability in the oil markets and making oil consumers especially USA domestic consumers pay higher oil prices.
All of a sudden, Trump’s twitter feed concerning oil prices has gone into the mute mode and is keeping quiet, solely because of his decision not to renew oil waiver on eight countries that import oil from Iran. His original plan was to reduce Iranian exports to zero but he realized this was almost impossible, as Iran can export more than one million barrels per day mainly to China, Turkey, and Russia via Iraq.
Today, the oil market is unstable, and OPEC-plus can do very little to push more oil into the market. There is little spare capacity mainly in Saudi Arabia to put more than 800,000 barrels per day in the coming months. With the approaching summer season and the month of Ramadan due in ten days’ time, Saudi oil consumption is reaching more than 4.6 million barrels of equivalent oil or about 2.6 million of crude and petroleum products.
At the same time, the oil industry is so fragile that any event in any of oil producing countries, such as the current war activities in Libya, disruption of supply from Nigeria, or the current situation of contaminated Russian oil, can lead the price to reach $80 per barrel in no time.
This will be a situation that will be prolonged to last one year or even five years during the tenure of the current administration and its stand with Iran. OPEC-plus will not be able to meet all the required world demand. Certainly, USA can pump more oil but not the quality required by consumers especially in USA refineries that need sour to heavy oil for which the domestic refineries are built.
Of course, oil producing countries can reduce their budget deficits with the current level of oil prices, but the concern is that in the long run, demand will become stagnant, and USA will improve its refining configuration to suit their new volumes of sweet crudes.
One question that is yet to be answered is – Why doesn’t USA use its strategic oil reserve of 700,000 million barrels to cool down the oil prices instead of pushing and pressing OPEC-plus for more oils?!
By Kamel Al-Harami Independent Oil Analyst