The oil market is flooded again: more is being produced than consumed. And this dynamic, which is expected to increase in the coming years, is once again forcing major oil exporting powers to act. The expanded version of the Organization of the Petroleum Exporting Countries – the so-called OPEC+, led by Saudi Arabia and Russia – agreed this Thursday to cut again the amount of crude oil it puts on the market, with the sole aim of restoring balance the sacred forces of supply and demand.
The producers’ narrative – “the negative sentiment is exaggerated,” OPEC said just a few weeks ago – and the facts go in a different direction. This umpteenth decline, equivalent to about a million barrels per day (1% of what is pumped worldwide), was almost obligatory: in less than two months, the price of Brent crude has risen from just under 100 dollars to just over 80 . a barrier that it even lost in mid-November. “The pressure on the group was great: prices fell sharply [en los últimos tiempos]said Amrita Sen, head of analysis at energy consultancy Energy Aspects, in statements to Bloomberg. The distribution of the quotas is still unknown.
It hasn’t even been half a year since the major oil producers last turned off the tap. It was in June when Saudi Arabia took the brunt of the sacrifice – a million barrels a day, just as it is now – to try to reverse the downward trend in prices. Then as now, the tug of war between exporters dominated the negotiations: the scope for the smaller countries to reduce their production is much smaller than that of the larger ones, with the petromonarchy of the desert at the head.
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The cartel has an additional problem: the promotion of non-OPEC producers (whether in the traditional version or in the expanded version with Russia) not only has not stopped growing, but will continue to do so in the near future and is destroying market shares most classic producers. The move by the United States, the world’s leading crude oil producer, is important. But there is more: the raw material capacity of Brazil – whose government, by the way, this Thursday confirmed the cartel’s invitation to join the club, which it has not yet confirmed – has grown significantly in recent years. And little Guyana was perhaps the star of the last oil miracle after discovering huge deposits that are already starting to bear fruit in the form of major production.
According to the US Energy Information Administration (EIA), this group of countries will add almost two million barrels per day to the global market for the whole of 2023, while the OPEC countries will reduce their supply by about half a million barrels. According to forecasts, this group is expected to increase its production by around one million by 2024; A number that could even grow to take advantage of the gap left in the global market by Saudi Arabia, Russia and its other partners.
The new cut of the 23 members of OPEC+ (the 13 of OPEC simply: Saudi Arabia, Iraq, United Arab Emirates, Kuwait, Iran, Angola, Nigeria, Algeria, Libya, Venezuela, Congo, Gabon and Equatorial Guinea; and the 10 non-members – external partners: Russia, Mexico, Kazakhstan, Oman, Azerbaijan, Malaysia, Bahrain, South Sudan, Sudan and Brunei) was scheduled for last Sunday. However, discord within the cartel over Saudi Arabia’s insistence that it would not take the entire cut alone forced the group to postpone the cut.
While waiting for the newly agreed bloc to come into effect, the expanded version of the cartel is now releasing 43 million barrels a day onto the market. It accounts for around 40% of global production of this raw material, which is the main cause of climate change and despite everything is still dominant in the global energy structure.
This Thursday’s pact – which is in addition to the five million barrels already withdrawn from the market recently – also coincides with the opening of the 28th climate summit. The host couldn’t be more paradoxical: Dubai (United Arab Emirates), an urban emirate dominated by oil and gas money.
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