OPEC+ considers strategies to ‘boost’ lagging oil prices

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Oil prices are almost on the verge of hitting a level of mid-70s from their high peak of $90 about three months ago. It is now time for the oil organization to do something, as its last action of further reduction of crude oil production by 2.2 million barrels did not do any magic. Perhaps O P E C + did not expect such a surge in US oil production by more than 13.2 million barrels, the highest in its history as well as a world record.

The surge in production is not going to stop and could hit 15 million. Such an increase in oil production will be followed by a gradual increase by Iran, Venezuela, Iraq, Brazil, and Canada, while OPEC+ members will have to live with their volunteer cuts.

Meanwhile, the oil demand is not forthcoming, as the economy of China is not moving the oil markets towards sufficient growth to fasten oil demands. This has led OPEC+ to be content with their reduced volumes, without any volume cuts, to be extended beyond June of next year. However, the oil organization must decide to have another review meeting and agree on further cuts. It is unlikely that it will have a consensus, and will therefore end up in disagreement. The question is – Did OPEC+ miss or miscalculate the new barrels coming into the market at such a fast rate, which led the USA to become the top oil and gas producer with the ability to satisfy the European Union’s demand, which can live for now with Russian oil and gas? As a result, the oil prices have been pushed to the level of $72, before jumping to $75, and may stay at such a level for some time, until cold weather hits the Western hemisphere and may create some increase in demand. Nevertheless, it will be short-lived.

The future doesn’t look bright for oil prices, with more on-stream volume coming from the Emirates and hitting five million barrels per day, and with Brazil at the same level, along with aggressive production from Iraq, Iraq, and Venezuela. A new oil producer Guyana is emerging with one million barrels per day. and OPEC+ has sent an invitation for the newcomers to join the oil organization and be an active member. Two new members will join and they may be asked to pitch in and reduce their production. This is the new trend in OPEC+ to face the decline in oil prices.

Despite the call for phasing out the use and production of fossil oil, top US oil companies seem to be heading for a boost in oil production and the acquisition of billions of dollars inside the USA. They are not as yet committed to lower global temperature, unlike European companies. It is a tough time for OPEC+. The reduction scenario is not working with mass production coming from everywhere from within and outside. It simply cannot manage or be able to start any sort of dialogue for the time being. The new challenge is how to tackle the decline in oil prices when the US with its new record volume, Brazil with one million barrels, and the newest potential member Guyana with its one million are hitting the oil market. Oil prices and OPEC+ need some miracles to bring up the oil prices!

By Kamel Al-Harami
Independent Oil Analyst
Email: naftikuwaiti@yahoo. com

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