Cautious outcome of OPEC+ in the face of price speculations

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THE influence of oil price speculations by the financial institutions is so immense that the current price level of $65 per barrel and above does not reflect the real market conditions. This is the reason for the hesitation expressed by OPEC-Plus at its last meeting.

This is because any indifference by the OPEC-Plus towards the current status quo would have resulted in immediate decrease in oil prices.

Uncertainty surrounds the oil market, as there is no definite direction. Perhaps this was what led OPEC-Plus to reach a fast decision within about three hours via video conference.

The expectation from the market is that OPEC Plus would ease the current situation by pouring more volume of oil into the market by around one million barrels from next month, while Saudi Arabia can reduce its voluntary volume by 500,000 barrels from one million barrels.

Kamel Al-Harami Independent Oil Analyst

None of it took place, and Saudi Arabia decided to further its cuts for one more month. There is uncertainty surrounding the oil market especially with the absence of any real demandsupply figure as most of the airlines are still halted, with limited travels, and without any concrete evidence of real economic and trade global growth.

This resulted in OPEC taking such an action that will later be met by severe criticism from oil consuming countries in curtailing production and letting oil prices soar, without any positive interferences. US shale producers are sidelined, enjoying higher oil prices and better returns, and allowing local US producers to face high oil prices and cause higher inflation rate to include most products. While oil producers are enjoying better and higher cash flow with better earnings, the oil consumers will suffer.

However, the concern is – for how long can OPEC-Plus go on curtailing and interfering with supply for the sake of higher oil prices and better returns at expense of global oil consumers? This could result in damages to the reputations of OPEC and its partners for many years in the absence of any price guidelines, if there isn’t a specific number that OPEC can aim for on a short-term basis.

Meanwhile, market speculators are taking advantage of the current situation, and OPECPlus’ decision is in between, but it has to monitor the market particularly the demand aspect of the oil market. Letting oil prices go unguided will for sure lead to collapse in oil prices. Last March is only one year old.

By Kamel Al-Harami Independent Oil Analyst
email: [email protected]

This news has been read 10682 times!

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