BAKU, Azerbaijan, Nov.2
By Leman Zeynalova – Trend:
Oil prices may be nearing the three-digit level and hence make worse some of the chronic economic problems the world is facing like inflation and higher shipping costs, Gal Luft, co-director of the Institute for the Analysis of Global Security (IAGS) told Trend.
This is bad news for global recovery and for energy security, he noted.
The expert pointed out that it is hard to see how OPEC+ can come to the rescue.
“The exporters already committed to stick to the July agreement to boost output by 400,000 bpd each month until at least April 2022 to phase out 5.8 million bpd of existing production cuts. Only a handful of members can contribute beyond that and it is not clear they will even want to do that. The OPEC+ arrangement is solid at the moment as both Russia and Saudi Arabia share a wide range of interests, oil being only one of them,” noted Luft.
The expert believes that much of what happens next depends on the December elections in Libya which can give rise to enhanced Libyan production as well as to the fate of the Iran nuclear negotiations.
Another unknown is whether or not the Biden administration will keep its oil export licenses or will it suspend them in order to boost domestic supply.
Sam Barden, Director of SBI Markets, an international commodity trading and advisory company, told Trend that prices will stay strong in the near term.
“I still think that the oil price could touch on $100. If it breaks $100 on the upside, then oil prices will keep going to $120 level before finding a level. At the moment, oil prices are consolidating at the current level of $80 - $85.
I am not sure that OPEC look to move prices as much as they attempt to meet demand. Bullish traders have an interest in moving prices to $100 as they are likely long at current ;levels. Bear market traders will be short at the current level. If the bulls squeeze the bears then short covering will send the market to $100. If Bears squeeze the Bulls then there will be selling and the price will drop to $70. OPEC will still meet demand either way,” noted the expert.
Barden thinks OPEC + will not collapse if more quotas are released onto the market, as long as it is done by agreement. There are many factors to the market at the moment, not least the issue of delivery and access to tankers to ship and deliver product into ports. The announcement of more quotas is as much for trading psychology as it is for actually balancing the supply and demand equation to affect real prices.
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