Home / Business / The optimism after the OPEC production agreement is over

The optimism after the OPEC production agreement is over


Analysts are worried that the increase in production will reduce the global emergency oil cushion, driving up prices.

Last Friday, OPEC voted to increase production from $ 1 to $ 1 million. Bloomberg.

OPEC responds to consumer demand for more crude oil, but that only makes the oil market more nervous.

The fleeting calm after the promise of Saudi Arabia that it would lead to a significant increase in oil prices. Last week's production melted away on Tuesday as tough US sanctions on Iran drew attention to the declining global emergency oil cushion

"The reduction of overcapacity on the part of OPEC makes the risk of price formation more exposed" said Brian Singer, CEO of Goldman Sachs Group Inc.

The inactive oil fields of the Organization of Petroleum Exporting Countries and their allies, mainly Saudi Arabia, can in case of emergency use a total capacity of about 3.4 million barrels per day, according to International Jan. Agency

These reserves are being reduced as the group introduced the promised 1

million barrel offer last week in Vienna, Saudi Arabia's plan to increase production next month to a record 10.8 million barrels a day would consume about 40% of its idle capacity and the world with a cushion of only 2.6% of the supply leave global

This would limit OPEC's ability to respond to new disruptions, and many more will come. Production in Venezuela is expected to continue to decline as the economic crisis intensifies. Earlier this month, Libya unexpectedly lost 400,000 barrels a day of production when a militia attacked two large oil terminals, causing another armed group to take control of part of the country's industry.

Washington, for its US allies, to halt the purchase of Iranian crude oil by November could, according to the consulting firm Energy Aspects Ltd. Selling 1.5 Million More Barrels Per Day

The OPEC dilemma was reflected in money laundering against crude oil prices on Tuesday. US futures came with the news that Saudi Arabia was planning a significant increase in production after rising to more than $ 70 a barrel for the first time in a month after the State Department had shown the pressure it intends to apply the Iranian oil industry

Risk factors

Venezuela is the risk factor for the longest supply. Production has already fallen by about 40% since 2015, due to an exhaustive recession, civil unrest and the exodus of workers from the state oil company PDVSA. The increase in supply agreed by OPEC and its allies last week was mainly intended to offset these losses, but the gap they cover will grow again as US sanctions against Iran come into force in November.

This month, the International Energy Agency said that by the end of next year, total output from Venezuela and Iran could drop another 30%, or 1.5 million barrels a day. That was before the United States announced harsher restrictions on Iranian exports than most analysts expected.

Even if OPEC and Russia compensate for this additional loss of 1.5 million barrels a day, the market will maintain a slim balance in 2019, the IEA said. By the end of next year, the Agency's additional capacity buffer could be reduced to a minimum of 3 years

This poses a significant risk to the security of global energy markets in the event of a sudden and unexpected increase in demand or supply, Goldman's singer said , Wall Street banks and other regions expect higher price increases due to the decline in overcapacity.

Source link