BAKU, Azerbaijan, June 6. The looming crisis inside OPEC+ may lead to lower revenues, Cyril Widdershoven, a Middle East geopolitical specialist and energy analyst, a partner at Dutch risk consultancy VEROCY, and Global Head Strategy Risk at Berry Commodities told Trend.
Talking about the OPEC+ decision to adjust production to 40.46 mb/d, starting 1 January 2024 until 31 December 2024, the expert noted that the main official reason is the still struggling oil prices globally, due to a perceived lack of demand growth from China and possibly EU/USA.
“The other main reason is the role of Russia, as the latter is clearly not committed to implement the last export cut, just producing and exporting as much as it can, hitting market share of others. At the same time Saudi Minister of Energy Prince Abdelaziz bin Salman's move to attack short - sellers last week, while also blocking media access to others, has put Saudi in a corner, forcing it directly to act on production,” he added.
Widdershoven believes that it doesn’t affect demand at all, as prices are still subdued, and maybe only will have a temporarily effect.
“Taking out 1 million bpd is just a token, not affecting current demand and supply in reality, as market is still struggling. However, in future, end 2023 it could be very significant as it gives Saudi additional room to play markets. The latter however only if other OPEC members, Russia and the USA are not going to produce more the coming months. Compliance of OPEC is under pressure. In general, expectations are that prices will increase, how much will be depending on supply volumes. If cuts in place, and demand should go up by 2-2.3 million bpd prices will increase to higher $80s or lower $90s per barrel,” said the analyst.
He pointed out that if cuts are really being done (OPEC is not always delivering) than prices will be slightly higher.
“If, however overall outcome is that other members are not keeping to their agreements, and Russia floods the market still, prices will be subdued or even could go lower. At the same time, if the looming crisis inside of OPEC+ between Russia - Saudi is getting stronger, than a total collapse of OPEC+ is to be expected without prisoners taken anymore. Revenues overall will be lower than in 2022!” the expert noted.
Widdershoven went on to add that it puts key oil-producing countries all under pressure, as African countries are now looking at lower base line production volumes, Saudi not producing 1 million bpd extra, UAE also cutting minimal, while Russia is maybe the exception (if prices are stable or slightly lower).
“Overall, there is a strategic conflict between Russia and Saudi, which can’t be solved without pain or blood in the streets,” he concluded.
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