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THE oil ministries of OPEC-Plus countries ended their meeting with a unanimous decision in exactly 30 minutes, which is the shortest time in OPEC history. The virtual meeting ended with the decision to increase production by 400,000 barrels per day from October next month, in continuation of their original agreement. The amount of increase will remain intact until the end of next year. Oil market anticipated the same and is expected to be smooth quickly. Other issues were solved in the last meeting and no item was left unattended on the table.
This leaves the oil ministers to enjoy their summer break for the remaining period. However, OPEC-Plus ignored the US call to increase production in anticipation of the hardening of the oil price and its impact on inflation. Meanwhile, the USA has been embracing itself or causing recession to the global economy because of lapses in the number of jabs or vaccines taken, which is about 50 percent or may be less.
It is ignoring the real fact or the simple reality that the vaccine is the only weapon to come back and fight COVID-19 and its various variants. Now, we all have to go into recession because the biggest economy is just ignoring the world demand of taking simple jabs for all or at least 70 percent of its population, in common with the rest of the world, and allowing the global economy to grow. The concern however is that an increase of 400,000 barrels per day may lead to drop in oil prices to about $60-$62 per barrel after a while, resulting in a surplus oil situation and reduced oil price of below $70. This could be a valid argument, but today the OPEC-Plus group is in charge and is doing its homework on a monthly basis and before every session. It is fully prepared and aware of every drop of demand for oil as well as the supply volume. Indeed, this oil organization is fully in charge and certainly knows what it is doing.
By Kamel Al-Harami Independent Oil Analyst