LAST month, OPEC-Plus’ discipline in terms of the crude oil production pushed the oil price closer to the level of $70 per barrel. It led Saudi Arabia and its other partners to put its production in order and keep the oil prices climbing up … But at what level? Will OPEC-Plus continue with its full commitment for another month and beyond April?
Will Saudi Arabia continue withholding back one million barrels well into April? Or is it time to relax production … but when? Strangely, the US shale producers are not yet willing to pour more oil into the market or retain its 13-million production target. It is taking advantage of the strong oil prices for generating cash fl ow and paying dividends to its shareholders, after years of lack of profits. The February production figures of the 13 OPEC members and 8 non-members stood firm and prevented any leakage of extra oil into the world. They emulated their leader Saudi Arabia in its sacrifice and in keeping its one million barrel away from the world market and losing an income of about $65 million per day.
The challenging question here is – At what level should oil price reach in order for countries to relax and pour more volume? Will it be until the US oil consumers start complaining, and the oil prices hit the US gasoline consumers’ pocket with $4 per gallon, or when they become so angry that some sort of pressure will fall on the US shale producers to pour and produce more oil? While waiting for positive world trade movements, will the $1.9 trillion package to stimulate the US economy, and the trade and commercial movements of China give OPEC the needed confidence to open its production taps? Next month’s meeting will be an indication about the direction of oil movement in terms of both volume and price. However, it again depends on Saudi Arabia’s outlook!
By Kamel Al-Harami Independent Oil Analyst