Oil between two rivalries

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ONE represents oil-producing and exporting nations, while the other represents oil-consuming countries. Disagreements frequently arise, particularly regarding fundamental aspects such as oil supply and demand figures, growth projections, and future trends. The organization is now known as OPEC+ following the inclusion of Russia as a significant participants due to its status as the second-largest producer with considerable infl uence in the market, comparable to that of Saudi Arabia. Undoubtedly, with the collaboration of these two key members, the oil markets are experiencing greater harmony and coherence.

Established in 1974, the International Energy Agency (IEA) was primarily formed by European nations, including Norway and Turkey, and later joined by Japan and the United States of America. The IEA’s core objective is to provide reliable data and offer policy recommendations. Functioning as a monitoring entity, it tracks global supply and demand figures, occasionally leading to open clashes, particularly in recent months. It is often referred to as the energy watchdog of the West. The prediction indicates that the current year will witness an influx of oil from the USA, Brazil, Guyana, and Canada, contributing to a record oil supply of 103.5 million barrels. The supply from the USA is anticipated to offset any reductions implemented by OPEC+. This contradicts OPEC’s estimates for stable growth and increased demand for oil this year compared to the previous year.

Despite this, oil prices have not reached the desired $80 per barrel since last year, putting OPEC+ in an awkward position and facing a second consecutive year of deficits. Although OPEC+ can release four million barrels into the market at any time, the demand is currently lacking. China’s awakening to boost demand and absorb any market surplus appears to be a distant prospect, making it a challenging journey for OPEC+ to navigate. OPEC+ remains steadfast in asserting that oil will experience a growth of 2.3 million barrels per day, but decrease to 1.8 million barrels by 2025. The IEA, however, does not anticipate such significant demand growth, which is in turn intensifying the rivalry and competition between the two sides.

More oil will enter the market from OPEC+ members. It will mainly come from Iran and Venezuela. The option of cutting or reducing oil is no longer considered feasible. Perhaps, it might be a suitable moment for OPEC+ to reconsider going back to the blackboard and formulate an alternative plan (plan B). Given the abundance of oil in the market, OPEC+ is reluctant to pursue further reductions and cuts. Therefore, they may need to accept the current price range of $77 – $79 and wait for a potential miracle to happen or revisit their plan B if available.

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

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