Oil: OPEC+ struggles to keep prices

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April futures for Brent crude on the results of last week rose more than 3%, responding to reports that OPEC+ meetings at all levels are discussing the possibility of giving institutional character to its cooperation after completion of the transaction to reduce production this year. “Now we need to take the next step to consolidate our success and to expand the interaction outside of the process of bringing to market balance.
We want to ensure the continuity of cooperation”, – said last week, the UAE energy Minister Suhail al-mazroui. Of course, OPEC+ ‘t want to return to the market volatility and downturn that we have faced in the years 2014-2016. They simply do not have the working capital in the required amount and have to change the structure of their costs to cope with a protracted crisis.
Partners are closely watching the level of supply, give generous discounts to regular customers and maintain contacts with producers of US shale oil (meetings take place in a bilateral format). According to the latest data hedge funds have cut bets on rising WTI crude oil since October last year. The threat of excess supply of oil undermines the confidence that the “black gold” will continue to recover with the same force as in January, when futures for Brent oil reached $70 per barrel.
Oil production in the United States exceeded 10 million barrels per day and, according to forecasts of the state may exceed the level of 11 million barrels this year, having caught up with the Saudis and us. According to Friday’s data, the number of active oil drilling rigs in the U.S. rose by the maximum of almost three-year low. This dynamic complicates the efforts of OPEC countries+ to restore balance in the global oil market according to the “tickets purchased”. Niches are occupied, and divided for a long time emergence of a new major exporter – the party of market forces to change all of the shares. OPEC and Russia will discuss at the meeting in April a new methodology for the evaluation of commercial reserves of oil and the levels on which you should focus, but in any case, the target level of oil prices in the near future remains strap $ 65 per barrel.
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Alexander Grigorenko,
Asset Manager
IR Global Capital