Two potential OPEC+ members are likely to pour more oil into the market. They are Venezuela and Iran, which are likely to bring in more than 400,000 barrels per day after the USA recently started relaxing its rules towards both countries.

The American states are also trying to buy about six million barrels in the next two months to fill their strategic reserve. The weakening of the oil prices seems inevitable, even though the current situation in the Middle East is very tense, which has pushed oil speculators to go for a level of $91 per barrel and above, even though the supply and demand in balance with the fresh supply will be emerging shortly. This is especially true with the production cuts of OPEC+ still prevailing until the end of the current year including the voluntary cuts by Saudi Arabia and Russia at 1.3 million barrels per day.

The question that needs to be addressed is - How will the oil organization cope with new barrels from its members Iran and Venezuela, along with the demand of its established members to increase their quotas as promised by OPEC+ during the quota meeting last year? Undoubtedly, the oil organization will be facing difficult challenges in dealing with such demands, while its members Venezuela and Iran will be exempted with no restrictions on their outputs. This is in addition to the fresh oils coming from the USA for pushing its production to more than 12.5 million barrels, with additional new oils coming from other oil companies, such as ExxonMobil with its new oil reserves after its acquisition of Pioneer oil for expanding its production. Our only hope is for the oil price to stay close to $90 per barrel, which depends on the demand rate to increase.

However, with the current war-like situation, it does not seem there will be any economic growth in fear of a war outbreak, and with no stability in the short term. Stagnation seems to prevail, along with uncertainty about what will happen next. The entry of the new volume of oil into the market, with Iran at 3.5 million barrels and Venezuela at close to one million barrels, will surely need new outlets and buyers. It seems quite impossible for OPEC+ to seek new production cuts. It must live with its current quota structure without any change for the next year in order to maintain its current price of $90, which it had struggled to achieve and maintain. Next year, 2024 does not seem to be an easy one for oil.

By Kamel Al-Harami
Independent Oil Analyst

Email: [email protected]