OPEC+ in charge again!

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There’s no doubt that the oil organization’s firm decision to reduce its global supply is effective, with all members fully committed. Even countries like Russia and Iraq, which initially delayed their decisions for a few months, are now on board. Russia has committed to reducing its output by 9 0 0 , 0 0 0 barrels per day starting from the end of next month.

This could push the barrel price to a range of $90 and perhaps beyond by the end of the year. Two fundamental factors are working together to achieve this – a tightening supply and an anticipated increase in demand. Energy analysts are predicting strong oil prices in view of these factors as well as OPEC+ commitment to its full adherence to the agreed production quota. A growth in oil is expected to reach the range of 1.85 million barrels per day this year. This in turn is pushing speculators to anticipate higher value for oil amidst tight supply and OPEC+ full adherence to its production cuts. The true test will be in June when the organization will hold its meeting to determine their next course of action regarding the continuation of the agreed-upon production cuts.

With all members fully committed and in full agreement, any potential infrastructure challenges with oil production, particularly in Mexico and Russia, will further add more energy to strengthen the barrel price. It now seems there is a consensus among financial institutions, including banks, and industry executives that oil prices will reach $93-$94 per barrel in the third quarter. However, it appears certain that OPEC+ will not welcome an oil price of $100 per barrel and will consequently ease its production cuts. This is aimed to prevent demand from plummeting on one hand and to discourage others from reinvesting and taking away their solid market share on the other. The oil organization is currently satisfied and does not want to disturb the momentum or cause the consumers to create noise. OPEC+, which is now back in control, is committed to satisfying its long-term customers and avoiding any actions that could be solely blamed for higher inflation.

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

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