AT the OPEC meeting on Thursday, the Saudi oil minister warned about the “rough sea” and that it is still a bit early to increase OPEC-Plus oil production. During the same meeting, the Russian minister spoke against heating up the market. These are clear signs that neither the oil market nor the world economy is ready for more volume of oil, as the demand for it is not there.
The OPEC-Plus then decided to put 350,000 barrels effective from May 1, a similar volume in June, and 400,000 barrels in July. Saudi Arabia is still not keeping one million barrels on the shelf out of the market until further notice or until it is confident of the oil market and sees positive directions of global readiness to accept additional crude oil. The gradual introduction of more oil into the market stems from the fact that there is no concrete evidence of solid demand for more oil and of global recovery. Yes there are some positive signs with the USA in particular and upcoming stimulus package of $ 2 trillion as well as creation of more than 18 million jobs; however, all this is in the pipeline and awaiting approvals.
his is in addition to recovery in China and India to move forward. The world has still not overcome the COVID-19 crisis and its impacts, as the number of cases are rising and popping up here and there due to lack of sufficient vaccines for all. The next three months will be quiet in terms of the demand for oil.
The real challenge will be during the driving season in the US and on July 4, with a push for additional 400,000 barrels per day, which may just be the time to release its one million barrels to keep oil prices “affordable”. It was another composed online meeting with a comfortable conclusion for OPEC Plus. The fact remains that there is no consensus on the direction of the oil market and the strength of the global commercial recovery… Therefore, caution remains the theme of OPEC Plus. Both ministers’ statements are correct both in terms of the rough sea and not letting the market be overheated. Time will tell whether the oil prices will react or remain at its current level of around $65 per barrel.
By Kamel Al-Harami Independent Oil Analyst