Oil price is in question: OPEC+ cannot raise a barrel to $90

Alliance experts refused to advise raw material exporters to reduce production

At its first meeting this year, the OPEC+ monitoring committee was unable to give clear recommendations on what the alliance members should do in 2024: whether to reduce the production of “black gold” or maintain production at the existing level. The organization’s experts limited themselves to abstract advice: monitor the situation and act according to the situation. Meanwhile, not all exporters are happy with crude oil prices, which hover around $80 per barrel. The price can be increased by further reducing production, but emergency situations – for example, a possible stop in supplies through the Red Sea – indicate that there is no need to rush into decisions.

As stated in the final communiqué of the OPEC+ monitoring committee, alliance analysts will continue to carefully evaluate market conditions and hope for the readiness of the bloc participants to respond to market developments in order to take additional measures at any time.

It is worth noting that the first meeting of OPEC+ experts included in the monitoring council of the community of producing countries, traditionally held in late January – early February of each year, often makes it possible to understand the mood and interests of the alliance members, which they will defend in the following months.

Currently, Brent barrel prices are hovering around $80. Exactly a year ago, the “barrel” of the North Sea variety was near the same mark. However, there are nuances. On the one hand, African OPEC+ members, in particular Angola and Nigeria, are not against increasing production and increasing export revenues from raw materials. They justified their position with forecasts from the International Energy Agency, which announced an increase in demand for “black gold” this year by 1.25 million barrels per day. On the other hand, existing supplies from the main producing regions, including Saudi Arabia and Russia, are encountering unexpected obstacles every day. The issue is no longer a matter of Western sanctions, which domestic exporters are successfully circumventing, but of the aggravation of the situation in the Middle East, military actions in which could cut off Europe from purchases along the main transit route for obtaining “black gold” – the Suez Canal.

Russia, in principle, is quite satisfied with the current oil prices. According to Deputy Prime Minister Alexander Novak, the current price on the market adequately reflects the situation, since it is determined by exchange trading, and not by industry officials in producing states. The same applies to Saudi Arabia, which, along with our country, is a co-chair of OPEC+. The day before, Riyadh refused to increase its production capacity from 12 million to 13 million barrels per day.

The participants in the OPEC+ committee, experts say, acted as expected. According to Freedom Finance Global analyst Vladimir Chernov, the geopolitical situation in the Red Sea is contributing to the rise in world oil prices. The most comfortable price for all OPEC+ participants is the price of Brent at $90, but as long as the barrel quotes are within $80, no one will take drastic steps. Only after prices drop to $70-75 per barrel will the alliance make additional production cuts.

“The price of a barrel is growing on its own,” agrees Artem Tuzov, head of the corporate finance department at IVA Partners. — Suppliers do not have to limit production. The growth of quotations is facilitated by the aggravation of tensions on the Arabian Peninsula. Since the beginning of the year, the Brent barrel has risen in price by 4.4%, and the upward trend continues. Disruptions in international logistics due to the shallowing of the Panama Canal and the shelling of ships by Houthis in the Bab el-Mandeb Strait are forcing more fuel to be spent on transporting goods.

Experts believe that our country’s OPEC+ partners are not yet concerned about Western energy sanctions against Russia, which has learned to circumvent them. “Sanctions by oil consumers against OPEC+ participants are perceived negatively and are a factor of pressure on all suppliers,” notes Chernov. “Everyone understands that about half of the countries that are members of the alliance may fall under US sanctions at any time, since Washington uses this instrument as a weapon and applies it to countries with which the White House is dissatisfied. That is, to all suppliers who intend to receive a fair price for energy resources.”