The Organization of Petroleum Exporting Countries (OPEC) and its allies led by Russia, a group so called OPEC+, dismissed demands from the United States for extra supply to halt rising prices, agreeing on November 4 to stick to plans to raise oil output by 400,000 barrels per day from December.
“The OPEC+ countries are not entirely convinced that the global economy is clear of Covid risk,” Chris Weafer, co-founder of Macro-Advisory in Moscow, told NE Global on November 5, adding that they are adding back oil each month while watching the trend in demand and in inventory levels.
“I believe they are more nervous of a setback to the recovery than they are about a supply squeeze. This is why they are not responding to US demands for more oil over the short-term,” Weafer said.
At the 22nd OPEC and non-OPEC Ministerial Meeting, held via videoconference, on November 4, OPEC+ ministers reaffirmed the continued commitment of the Participating Countries in the Declaration of Cooperation (DoC) to ensure a stable and a balanced oil market, the efficient and secure supply to consumers and to provide clarity to the market at times when other parts of the energy complex outside the boundaries of oil markets are experiencing extreme volatility and instability, and to continue to adopt a proactive and transparent approach which has provided stability to oil markets.
“OPEC has been here before, when the oil price was rising quickly against a backdrop of rising demand,” Weafer said, reminding that it did previously respond to consumer nation demands for more oil and then, relatively quickly, found itself in a situation of over-supply and weak prices. “OPEC has learned from previous experiences, and they have specifically learned not to make knee-jerk reaction supply adjustments. That has cost it dearly in the past,” Weafer said. “So, they are sticking with their agreed strategy of a steady incremental return of supply and are watching the demand and inventory data closely,” he added.
“The days of OPEC being bullied into short-term expediency actions by big consumer nations are well and truly over,” he said.
According to Weafer, OPEC+ is most unlikely to add more oil, than is currently planned, through the winter months. It will assess the situation in the spring, i.e. the two year anniversary of the production cut, and then decide what action to take. “Most unlikely to do anything before that,” he said.
On November 5, Brent crude rose $1.73, or 2.2%, to $82.27 a barrel by 11:20 a.m. EDT (1520 GMT). West Texas Intermediate crude (WTI) gained $2.08, or 2.6% at $80.89, Reuters reported.
“It is interesting to note that senior OPEC officials, such as the Saudi Oil Minister, are now echoing what (Russian) President (Vladimir) Putin has been saying about the European gas market. Putin is blaming the recent gas price spike on the fact that the Western nations went headlong into a new energy strategy, i.e. one based on renewables and emission reduction targets, without any clear idea about managing the energy transition,” Weafer told New Europe.
“Essentially Saudi Arabia’s Oil Minister, Prince Abdulaziz bin Salman, said this week that the West should not blame the oil producers for their screw up. That’s pretty much what President Putin has been saying,” Weafer said.
Russian Deputy Prime Minister Alexander Novak said on November 5 the oil price at around $80 per barrel objectively reflects the current market situation. “In my opinion, today’s price at around $80 per barrel objectively reflects the current situation. Let’s see what will happen in December-January, proceeding from the facts that I mentioned,” Novak said in an interview to the Rossiya-24 TV channel, Tass reported.
According to the Russian Energy Minister, now there are a number of uncertainties on the market that can play a role in lowering the price of oil, everything will depend on the situation in late 2021-early 2022. “There are many factors that push the price up, as well as many uncertainties that can lower the price,” Novak said, adding, “Everything will depend on the situation that will develop during November – December 2021 and the first quarter of 2022. We are now seeing the spread of the delta strain, which is a negative factor, restrictive measures are being introduced in many countries”.
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