10/12/2023–|Last updated: 10/12/202310:28 PM (Mecca time)
A report on the Oil Price website said that the OPEC+ alliance may intervene again if oil prices decline further and demand is disappointing.
But the report indicated that what it described as “disagreements within the group” may make the process of making a unanimous decision – on production policy – more difficult next year.
Oil prices rose by more than 2% last Friday, but the two benchmarks fell for the seventh week in a row, the longest series of weekly declines in half a decade, due to ongoing fears of increased supply.
OPEC Plus decided at its last meeting to implement additional voluntary production cuts of about 2.2 million barrels per day, including extending the current Saudi and Russian voluntary cuts of 1.3 million barrels per day, but the members of the group did not unanimously agree to extend or deepen the voluntary oil reduction.
Saudi Arabia and Russia also called on all OPEC Plus member states to join the group’s agreement to reduce oil production.
The Oil Price report, written by Tsvetana Paraskova, attributed the decline in oil prices following the OPEC Plus decision to:
- tdTotal US inventories.
- Concerns about the Chinese economy.
- Fears of weak growth in global demand for crude oil.
The author believed that the OPEC Plus group – which includes OPEC and other members led by Russia – must deal with all signs of decline, with the market currently focusing on demand rather than supply.
Oil prices next year
The writer stated that the management of the oil market by the OPEC+ alliance will be essential in determining the fate of prices next year.
It quoted analysts as saying, “The future expectations of the oil market depend to a large extent on the OPEC Plus policy.”
They reported that the recent OPEC Plus cuts would be sufficient to erase the previously expected surplus in the market for the first quarter of 2024, but the market would appear largely balanced during the first half of 2024.
According to the author, the ING Group expects Brent crude to trade at its lowest levels at $80 early next year, while it expects the average price of Brent crude to reach $91 per barrel during the second quarter of 2024 when the market returns to deficit.
The dilemma of American production
The writer saw that OPEC Plus is currently facing the same old dilemma, which is how to confront the rise in American production and prevent it from undermining the coalition’s efforts to support prices.
Supply from outside OPEC Plus is growing – the author says – at a faster pace than previously expected, and is led by record production of US crude oil, which has continued to rise.
US crude oil production recorded a new monthly record of 13.236 million barrels per day last September, according to the latest data issued by the Energy Information Administration.
The writer said that the OPEC Plus group will have to take into account many variables in its market management policies next year, including the “new threat” to its market share in light of the rise in American production and non-member countries of the alliance.
Demand factor
The writer said that demand is currently seen as a factor driving a decline in oil prices, especially demand at the beginning of next year at a time when concerns about the performance of the two largest economies in the world (the United States and China) dominate market sentiment.
This week, Moody’s revised its forecasts Regarding the Chinese government’s credit ratings From stable to negative, she said The change in forecasts reflects increasing risks associated with continued structurally low economic growth over the medium term and the continued downsizing of the real estate sector.
Moody’s expects China’s annual GDP growth to slow to 4% in 2024 and 2025, and to an average of 3.8% in the period from 2026 to 2030.
However, China expressed its “disappointment” regarding Moody’s decision, and stressed in a statement that it has the ability to confront risks and challenges.
She said that it withstood risks and challenges from outside and inside, which led to an increase in the gross domestic product by 5.2% on an annual basis during the first three quarters of this year.
