The Secretary General of OPEC talks to “energy” about the decisions of OPEC +, and will oil prices reach $100? (a dialogue)

OAPEC Secretary General, Eng. Jamal Issa Al-Loughani, revealed his vision and assessment of the OPEC+ decisions announced by the coalition at the conclusion of its meeting on Sunday evening, June 4, and subsequent separate statements by Saudi Arabia and a number of countries regarding the voluntary reduction in oil production, and the position on current developments in the market.

In an interview with the specialized energy platform, Al-Loughani stressed the importance of the decisions announced by the coalition, and their role in achieving balance in the oil market, noting that there are strong justifications supporting them, and “the positive results of these decisions will appear in the near time.”

As the OPEC + alliance announced the stabilization of the policy of reducing production, previously estimated at 2 million barrels of oil per day, and adjusting the daily production level at 40.46 million barrels in the period from January 2024 until the end of December of the same year, in addition to adjusting the base month that It calculates the oil and compliance stakes in the coalition starting next year.

After the end of the meeting, Saudi Arabia issued a separate statement, during which it announced the extension of its voluntary reduction in oil production by 500,000 barrels per day until the end of 2024, in addition to reducing one million barrels per day, starting next July, for a renewable month.

This step was followed by the announcement by Kuwait, Iraq, the UAE, Gabon, Kazakhstan, Russia, Algeria and the Sultanate of Oman to extend the voluntary cut announced by them in April (by 500,000 barrels per day) until the end of 2024.

The following is the text of the energy platform’s dialogue with the Secretary General of the Organization of Arab Petroleum Exporting Countries, OAPEC, on the occasion of the current developments in the oil market following the OPEC + meeting:

What do you think of the OPEC+ decisions taken by the coalition, and then the move to voluntarily reduce Saudi production by one million barrels per day?

The OPEC + group of countries has always followed a proactive approach that relies on continuous evaluation and follow-up of developments in the global oil market, and its full readiness to make immediate adjustments to production levels in various forms, whenever such proactive steps are required.

In October 2022, OPEC + countries took a decision to reduce their production level during the period (November 2022 – December 2023) by 2 million barrels per day from the target production level in August 2022, which was at The level of 43.856 million barrels per day, to reach after the reduction to 41.856 million barrels per day.

This comes before some members of the OPEC + group, namely the Kingdom of Saudi Arabia, Kuwait, the Emirates, Iraq, Algeria, Gabon, Russia, Kazakhstan and the Sultanate of Oman, announced an additional voluntary reduction in their production, amounting to a total of 1.66 million barrels per day, starting from May 2023 until the end of this year, to reach the level of The target production of the coalition during that period is about 40.2 million barrels per day.

Continuing to follow the successful approach of OPEC + countries, the coalition decided on June 4 to adjust the target total level of crude oil production to the level of 40.46 million barrels per day, starting from January 1, 2024 until December 31 of the same year. The extension of the voluntary additional cut referred to above was also announced until the end of 2024, and the Kingdom of Saudi Arabia announced a new additional voluntary cut of one million barrels per day, starting in July 2023, for a period of one month, subject to renewal.

In this context, we would like to confirm the success of the approach adopted by the OPEC + group of countries, which is to take proactive and preventive measures after carefully reading the outcome of the oil market in the short term.

Does the market need these steps, despite previous expectations that the demand for oil will increase in the second half of 2023?

The purpose of taking these measures is mainly to support the stability and balance of the global oil market, especially in light of the state of uncertainty surrounding the global economy, and its repercussions on the expectations of global demand for oil, as OPEC’s expectations indicate that it will rise by about 1.5 million barrels per day during the second half of 2023, bringing its average to 102.6 million barrels per day.

When looking at the indicators of the performance of the Chinese economy (the largest global importer of oil), it becomes clear to us that the irregular recovery in this performance during the recent period is contrary to what is expected, and that the continuation of high inflation rates in the United States of America and Europe may lead to weak demand for oil. Hence, the importance of the proactive and preventive approach adopted by the OPEC + group of countries appears, and that its recent decision, from our point of view, is a step in the right direction, and we will soon see its positive results.

Do these decisions support oil prices again to the $100 level?

As everyone knows, crude oil prices are determined based on the combination of a group of factors that prevail in the oil market, including what is related to the fundamentals of the oil market, such as levels of demand and supply and the movement of stocks, in addition to other factors such as geopolitical developments, the strength of the US dollar, and frantic speculative activity by investors. in the futures markets.

Accordingly, it is difficult to predict and determine a specific level that crude oil prices may reach during the coming period, especially in light of the existence of several different scenarios that mainly depend on the changes that may be witnessed by the aforementioned group of factors.

But the recent decisions of the OPEC + alliance may be a strong reason for higher prices?

The recent decisions of the OPEC + group of countries represent only one factor that may affect oil prices, and perhaps their reaching the level of $100 a barrel again thanks to its acquisition of a share of 40% of global crude production, but there are other factors whose effects must be taken into account on oil prices.

Do you expect the United States of America to temporarily back down from the strategic stockpile refill step, if prices rise above $80 a barrel?

It should be noted first that the maximum storage capacity of the US strategic oil reserves amounts to 714 million barrels, and the strategic crude oil stocks in the United States witnessed a decline during the week ending on May 26, 2023, to their lowest recorded level since September 1983, to reach 355.4 million barrels.

This comes after the record withdrawals conducted by the United States from its strategic stocks during the year 2022, which amounted to 180 million barrels, within the framework of the IEA member states’ tendency to use these stocks as a tool to influence the balances of the global oil market following the Russian-Ukrainian crisis, which is Which has been proven ineffective over time.

The US Department of Energy also recently indicated its intention to purchase about 3 million barrels of crude oil for delivery during August 2023, in an initial step to refill its strategic stocks, knowing that on October 18, 2022, it had previously announced its intention to replenish Buy strategic stock crude oil when prices are at or below $67 to $72 per barrel, which is lower than current prices.

Therefore, it may be unlikely that the US will temporarily back down from the plan to fill the strategic stockpile if prices rise above $80 per barrel, especially given the low levels recorded by those stocks.

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