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OPEC+ may boost production, oil prices to ease back - Capital Economics

Economy Materials 24 June 2022 11:17 (UTC +04:00)
OPEC+ may boost production, oil prices to ease back - Capital Economics
Maryana Ahmadova
Maryana Ahmadova
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BAKU, Azerbaijan, June 24. Brent oil is expected to decrease to around $100 per barrel, if OPEC+ will aim at producing more, Trend reports via Capital Economics, the UK-based research and consulting company.

According to the forecast, OPEC+ will complete with raising its production quotas and come up with new policy. However, most members fail to meet the production goals as fast as the quotas have been increasing.

“There are some members with spare capacity, primarily in the Gulf, who are chaffing at the bit to raise output. We’ve thought for some time that Saudi Arabia and the UAE will eventually seek to expand market share and capitalize on as much of their oil resources as possible. However, most other members don’t have the capacity to boost output in the short term. If anything, we think some members, notably Angola and Nigeria, are likely to see lower production in the coming months, as years of underinvestment continue to plague production. Further complicating matters, Russia’s output has fallen recently due to Western sanctions, and the outlook there is highly uncertain,” Capital Economics said.

As Capital Economics predicts, if Saudi Arabia and the UAE raise production from September, the price of oil would go down, as would the revenues of other OPEC+ members.

“Towards the end of this year, releases of strategic oil reserves by Western countries will start to wind down, meaning that there should be scope for OPEC+ to raise production without causing prices to dramatically fall. Moreover, we don’t think that Saudi Arabia and the UAE would fully exhaust their spare capacity,” the research noted.

Thus, Capital Economics thinks that OPEC+ will allow those members, who can actually raise their production, to do so, and this will pave the way for Saudi Arabia and the UAE increase their output.

“However, if risks to demand today materialize in the future, OPEC+ can always re-adjust its output plans. We think it would be more sensible for OPEC+ to focus on what it can influence today, which is containing prices with the aim of maintaining market share and minimizing demand destruction,” the research concluded.

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