What really drives oil trading market?
Baku, Azerbaijan, June 16
By Leman Zeynalova – Trend:
The uptick in OPEC production originates from the so-called unregulated members - Libya, Nigeria and Iraq - whose production is determined by internal dynamic rather than the decisions made in Vienna, Gal Luft, co-director of the Institute for the Analysis of Global Security (IAGS), a Washington based think tank focused on energy security, and a senior adviser to the US Energy Security Council, told Trend.
“The reality is that the oil trading market is driven by discounts and the discounts offered by those members are attractive. Buyers therefore drift in their direction despite the greater risk,” he added.
Earlier, the International Energy Agency (IEA) said in its report that OPEC crude output rose by 290,000 barrels per day in May to 32.08 million barrels per day, the highest level so far this year.
On May 25, OPEC member countries and non-OPEC parties, Azerbaijan, Kingdom of Bahrain, Brunei Darussalam, Kazakhstan, Malaysia, Mexico, Sultanate of Oman, the Russian Federation, Republic of Sudan, and the Republic of South Sudan agreed to extend the production adjustments for a further period of nine months, with effect from July 1, 2017.
The reductions will be on the same terms as those agreed in November.
Regarding the diplomatic tension between Qatar and some Gulf countries, the expert said he doesn’t see long-term market implications, as none of those countries affords to lose revenues at the moment.
“Besides, Qatar's main source of revenue is LNG (liquefied natural gas) exports and its contracts are stable and lasting. It is far less dependent on crude exports as the members of the Gulf Cooperation Council,” added Luft.
The spat began after Qatar’s state-run news agency, QNA, released remarks attributed to ruling Emir Tamim bin Hamad al-Thani, in which he criticized other Gulf leaders and called for an easing of tensions with Iran. QNA has denied that the comments were made by the Emir, claiming that they were the result of a cyber attack. But this hasn’t washed with Saudi Arabia and its allies. They argue that the comments highlight Doha’s close ties with Iran and reinforce their long-held concerns over Qatar’s support for terrorism.
Saudi Arabia, Egypt, the United Arab Emirates, Yemen, Libya, Bahrain, and Maldives have severed diplomatic ties with Qatar, accusing it of fueling extremism and terrorism.
Qatar says move is "unjustified" and says it carries out its duties in the fight against terrorism.
Follow the author on Twitter: @ Lyaman_Zeyn