NOW that oil prices have surpassed the level of $60 a barrel, it is hard for the oil-producing countries to ignore such a level. The situation is such that overproducing and ignoring OPECplus quota will become more acceptable and legitimate.
This is because there wasn’t any targeted level or price level that was agreed upon, due to which any level seems better and comfortable to most oil producers under today’s situation of low economic activities, lockdowns, and COVID-19.
This is despite the introduction of various vaccines, which may cover most countries of the world by the end of current year.
In other words, any level above $60 is great news for now to ensure better daily cash flows. The latest news about some leaks and overproduction by the member states of OPEC-Plus is not surprising and was expected. Why can’t countries that are most hurt economically take full advantage of such improvements in oil price that was not seen in over 12 months? Perhaps, the lack of setting up of a price target by OPEC-Plus could be the next task along with quota restriction by the group.
The absence of it will certainly lead to more cheating or over producing. This could be discussed in the next-month’s production. At the same time, the oil market will be awaiting Saudi Arabia’s decision to suspend its slow reduction by one million barrels per day from April. Or it could continue for another month, which is highly doubtful, as it could lead to further eroding of the oil price back to its $ 60 level and below.
The recent surge in oil price to $64 per barrel is not due to OPEC-Plus restriction but more due to suspension of oil production of four million barrels per day along with the closure of more than 25 refineries in Texas because of severe weather conditions and heavy snow. It has impacted oil supplies to the entire USA since Texas is the largest oil and gas producing state in America.
Now that life is returning to normal, oil prices have started to return to normal levels, and could be pushed further down by the end of next month, with the end of global oil demand from its peak winter seasonal requirements. The outcome of next month’s meeting will be interesting for OPEC Plus due to the decision it is to take, as it will have a big impact on the oil prices for months to come or until the end of the pandemic.
By Kamel Al-Harami Independent Oil Analyst