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LAST month, the supply of OPEC+ was short by about one million barrels from the agreed additional oil volume of 400,000 barrels to add to the oil market. Among the OPEC+ members, seven fell short of meeting their expected volume of oil by 900,000 barrels, resulting in the tightening of global oil supply. Meanwhile, inflation in the US is hitting a 40-year high with the gasoline price hitting the pockets of end consumers and the voters by paying about $3.797 per gallon.
This is putting pressure on the current US administration, and can have an effect on the various US elections. This led to recent calls between the US administration and Saudi Arabia, which is the one country with excess oil, and can push more additional oil into the already-tight global oil market. Saudi Arabia could be limited with additional oil supply. Perhaps it is time for the US to agree on a quick solution and reach a deal with Iran to allow it to bring into the thirsty market maybe 1.5 million barrels of fresh Iranian oil in order to ease the tension and pressure on OPEC+ members.
Undoubtedly, such a volume or additional oil will be of help in preventing further escalation of oil prices in hitting beyond $93 per barrel. The world needs more supply, as the stocks are down by more than 60 million barrels. US’s release of its strategic reserve will be of no value or advantage to the oil market, and its impact is causing the hardening of oil price. It is just causing more depletion of its domestic reserves. At the same time, the US oil producers are trying to push for more shale oil, realizing it is an opportunity to take full advantage of the high oil price. Even if the production cost could reach $50 per barrel, they still can make money and reward their owners handsomely.
The US also can use Venezuelan oil if the current administration allows American oil companies to import oil against the outstanding debts due from the Venezuelan government. Two oil countries can ease price tension and can bring about a better global supply situation. OPEC+ members can no longer supply the agreed monthly volume of 400 million barrels. The need for fresh oil is a must. Saudi Arabia can help in cooling down the oil prices through additional supply of oil, but it is under constraint by the agreed quota volume and cannot act individually. However, additional oils from Iran and Venezuela can really prevent the oil price from reaching $100 level and ease the global inflation rate hopefully.
By Kamel Al-Harami
Independent Oil Analyst