Oil prices rise again after OPEC + decision

Oil prices rose again on Thursday, after the Production cut announced by Opec+which US President Joe Biden seeks to offset, although without convincing the market.

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The price of a barrel of North Sea Brent for December delivery gained 1.12% to $94.42 in London, hitting a one-month high. As soon as a barrel of West Texas Intermediate (WTI) for November delivery gained 0.78% to $88.45.

“It is difficult to bet on a drop in crude oil prices,” said Edward Moya, from Oanda, in an analysis note, for whom the decision of Opec + “shuffled the cards in the oil market.”

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The cartel decided to cut its production by two million barrels per day (mbd) starting in November, out of a current total volume of 43 mbd. It also resolved to meet every two months versus one meeting a month now.

This means that current fees will not be reviewed until December, to be applied in January. Analysts agree that the 2 mbd will actually be much less, around 1.2 mbd, according to consultancy Rystad Energy.

Indeed, many members of the group, notably Russia, Nigeria or Angola, produce much less than their quotas indicate, due to lack of capacity. Analysts at Goldman Sachs expect the price of crude oil to shoot up to $110 a barrel by the end of the year, up from $100 earlier.

“We study the possibilities within our reach” to compensate for this reduction and avoid a new price escalationUS President Joe Biden said on Thursday, saying he had “numerous” options.

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The United States has already announced that it will put 10 million barrels of its strategic reserves on the market in November, despite the fact that the program for the use of reserves would end in October after using more than 200 million barrels.

“Ultimately, strategic reserves have been used to balance the oil market,” recalled Michael Lynch of Strategic Energy & Economic Research. “To achieve this they don’t have to go much lower, because if they don’t, the effect starts to wear off,” he said.

The White House considers temporarily suspending exports to ease the domestic market and gasoline prices.

“That would send the message to the rest of the world: ‘We are in command, not OPEC,'” said Mark Waggoner of Excel Futures. “It’s not realistic,” Michael Lynch estimated instead, for whom Biden’s reaction resembles “political gesticulation.”

AFP