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LAST month, the total production of OPEC+ was 42.67 million barrels per day, which was slightly lower than last month. Saudi Arabia is the top oil producer with a rate of 10.46 million barrels, with Russia which is still not much affected by the G7 boycott. The market continues to be comfortable with the oil supply and the acceptable price levels ranging between $80 and $85 per barrel. The concern is not about the current months but the future, especially the last two quarters of this year.
This year, Europe did overcome the winter months but what about the coming two years of 2024 and 2025 while it is building up its logistical supply from different locations and destinations? The Russian oil volume has not been affected much unlike its revenues, which serves as the financial source to fund its Ukraine war. This may lead to shortening the duration of the war.
The concern is the anticipated varied opinions expecting more growth and demand of more than 2.5 million barrels this year with limited supply capacity and availability. This could cause some tightness in the oil market during the last quarter of the year. The recent announcement related to re-establishing Saudi-Iran diplomatic relations will solidify the relationship with OPEC and OPEC+.
This will be an added value for the oil markets by ensuring more discipline and order. Along with this is the hope for Iran to push the oil production from the current level of 2.6 million barrels to perhaps 3 million barrels per day, with the help of the biggest producers and the second largest oil consumers. It is another victory for OPEC+ in terms of better coordination and distribution of oil volumes.
China continues to enjoy a close relationship with oil producers and has mutual investments in the three countries, despite the heavy boycott on Iranian oil and gas. Maybe the time has come for the region to concentrate on its resources to be developed for the world and to be active in global trade. From all angles, it seems as though the situation of the oil market is going to be positive, mostly driven by OPEC+. The extra volume could be available from different producers through various mechanisms. This will neither cause any panic in the market, nor fear of any oil shortage. The harmony among all the oil producing countries has never been at such a level before. Even the oil consumers are in tune with the producers. This will certainly lead to stability of the oil prices in the long run.
By Kamel Al-Harami
Independent Oil Analyst