The countries pushing oil prices down are named: how big is the risk?

What is the reason for Washington’s intention to fail OPEC+ production cuts?

Efforts to stabilize world oil prices, undertaken by the OPEC+ alliance of producing countries, risk not working. Against the backdrop of the prolongation of the decision of the main members of the alliance to limit the production of “black gold” for the next year, which should serve to increase hydrocarbon prices, a number of raw materials countries, including not only Venezuela and Iran, previously subject to sanctions, but also the United States, are actively increasing production . And their policy risks collapsing the price of “black gold” to dangerous levels.

The results of the 36th meeting of the relevant ministers of the OPEC+ countries, held at the end of November, can be considered almost the most unsuccessful for the entire period of the oil club summits. As a result of the negotiations, a verdict that seemed promising for strengthening the barrel was adopted – to continue limiting production for the next year: Saudi Arabia cut capacity by 1 million barrels per day, Iraq – by 223 thousand, UAE (minus 163 thousand), Kuwait (135 thousand), Kazakhstan (82 thousand), Algeria (51 thousand), Oman (42 thousand). These reductions were supplemented by Russia, which extended its voluntary daily reduction in supplies by 500 thousand barrels.

However, the reaction on international fuel exchanges turned out to be the exact opposite of the expected effect. Despite the decrease in future supplies of raw materials, which should have led to a rise in price of a barrel, oil tariffs fell: in particular, a barrel of the benchmark North Sea Brent grade fell from $82 to $76 per barrel.

The market’s illogical response is provoked by the behavior of producing states that are not members of OPEC+ and do not hesitate to increase export profits from hydrocarbons, taking advantage of their possible shortage in the future. According to S&P Global Commodity Insights, although Tehran and Caracas are exempt from the alliance’s production limits and still remain under US sanctions, they nevertheless continue to increase their own capacity: Iran added 50 thousand in November, and Venezuela – 40 thousand barrels of production. They were joined by Gabon (plus 20 thousand per day) and Azerbaijan (10 thousand).

Meanwhile, the main beneficiaries of the reduction in “black gold” production include the United States of America, for which this year oil became the main export commodity for the first time in a quarter of a century. In just the third quarter, the export of liquid hydrocarbons brought American companies $83 billion more than in the entire 2022 (+19%), and allowed in November to reach a record level of production of almost 14 million barrels per day and the most productive volume of foreign supplies – approximately 6 million barrels daily. For comparison, for 2024, OPEC+ participants agreed on joint production at a level of slightly less than 44 million barrels. The main players in the producing alliance, primarily Saudi Arabia and Russia, against which oil barriers are in force, began to slowly lose to their overseas competitors: quotas for daily extraction of raw materials for both powers for the next year were approved in equal amounts – about 10.5 million barrels.

“We should not forget that other large resource-producing countries on the planet have also begun to open the taps to the fullest, capable of weakening the established value of market quotes,” notes Sergei Suverov, investment strategist of Arikapital Management Company, associate professor at the Financial University under the Government of the Russian Federation. For example, Canada last year increased oil production by 168 thousand barrels daily. In 2024, according to S&P forecasts, Canadians promise to become world leaders in the growth of “black gold” production and increase the volume of raw material extraction at their fields to 5.3 million barrels per day.

In turn, Brazil, which is going to join the OPEC+ charter in 2024, now produces on average more than 3.5 million barrels per day, but, apparently, is also not going to stop there. According to the national oil and gas holding Petrobras, in the near future production at local fields will increase by 4-5% per year.

Under such contradictory circumstances, notes BitRiver Communications Director, economist Andrei Loboda, post-Christmas prices on the “black gold” market, and, it is possible that the cost of raw materials for the entire coming year, will be mainly determined not by the largest mining powers, but stock speculators. Which, without a doubt, will choose the beaten path – they will stock up on additional volumes of fuel during the period of low prices, so that in the future, when prices rise, they can sell the accumulated “barrels” with a decent cash margin.

However, so far no significant price fluctuations are expected on the global oil market. “The current prices of $75-80 suit both exporters and importers: the former receive stable income from the sale of energy resources abroad; the latter can make economic plans for the future, focusing on stable fuel tariffs, Suverov believes. “However, if any additional factors arise, primarily the worsening risk of recession in Europe and the United States, the demand and consumption of hydrocarbons may decline, which will drop prices to $60 per barrel.”