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Comment by Noah Barrett, Research Analyst for Energy and Utilities at Janus Henderson Investors, Regarding Today’s OPEC Meeting
It was a fairly quick meeting of the OPEC+ today, with an outcome that should support oil prices. OPEC+ agreed to increase production by 100k b/d in September, and the increase will be shared among member countries.
Given that some countries are currently underproducing their quotas, this means they may not be able to fulfill their part of the 100kb/d increase in September. Therefore, while we see an increase of 100kb/d (which is quite small), the actual increase in supply may be even lower than that.
The U.S. likely expected a larger increase in production, especially following Biden’s recent trip to the Middle East. In terms of overall supply/demand management, OPEC’s decision makes sense.
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Oil near US$100 raises tension on Wall Street and amplifies global fear about inflation, energy, and the Middle East crisis
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Oil moves trillions worldwide, dominates energy generation, and continues to be a strategic resource for major global powers.
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United States intercepts six Iranian vessels in the Strait of Hormuz and April ceasefire is once again threatened
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Venezuela sits on almost 20% of the planet’s proven oil, but exploring the Orinoco Belt could turn the world’s largest reserve into a climate, environmental, and industrial problem.
There is still significant uncertainty about oil demand in the middle of this year, driven by concerns around Chinese demand and the potential for an American or even global recession. Additionally, excess capacity remains tight; OPEC’s press release categorized the availability of excess capacity as “severely limited”, which also constrains OPEC’s ability to bring an increased supply of material to the market.
Source: Sherlock Communications | Via Miguel Piñeiro Rodríguez
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