Prices continue their downward trajectory … and the “Seven” to study the “Russian ceiling”
A document seen by “Archyde.com”, on Thursday, showed that the joint technical committee of “OPEC Plus” expects a deficit in the oil market in 2023, amounting to 300,000 barrels per day.
The committee, which held a meeting, on Wednesday, expected that demand will fall short of supplies by 400,000 barrels per day this year, in a downward revision to previous expectations of 500,000 barrels, after taking new assumptions for demand into account. The document showed that the committee expects the deficit to widen to 1.8 million barrels per day in the fourth quarter of 2023.
The committee’s assessment took into account the lack of production of some member countries for the rest of 2022 and 2023. An OPEC source said, “No member countries are expected to produce higher levels than their production in July, with the exception of Saudi Arabia, the UAE and Kuwait.” He added that the data took this into account.
The committee advises the “OPEC Plus” alliance, which includes the Organization of the Petroleum Exporting Countries (OPEC) and allies from outside, including Russia, on market fundamentals. Many of the “OPEC” and “OPEC Plus” countries lack the ability to increase production due to the lack of investments in oil fields, as well as the sanctions imposed by the West on Iran, Venezuela and Russia. The production of the member states of the coalition was about three million barrels per day less than the quotas set for July.
The committee said that the market will remain scarce for the rest of this year and in 2023, adding that preliminary data for commercial oil stocks in the Organization for Economic Cooperation and Development will remain below the five-year average for the remainder of 2022 and through 2023.
In the markets, oil prices fell in early Asian transactions on Thursday, due to increased supplies and fears of a further slowdown in the global economy, with the renewed imposition of restrictions to combat “Covid-19” in China.
By 1009 GMT, Brent crude futures fell $2.03, or 2.12 percent, to $93.61 a barrel, and West Texas Intermediate crude futures fell $1.84, or 2.05 percent, to $87.71 a barrel.
The latest market volatility came on the heels of fears of insufficient supplies in the months following the Russian invasion of Ukraine, and as the Organization of the Petroleum Exporting Countries (OPEC) struggled to increase production. But production in OPEC and the United States increased to its highest levels since the early days of the Corona pandemic.
According to a survey conducted by “Archyde.com”, OPEC production increased to 29.6 million barrels per day last month, while US production rose to 11.82 million barrels per day in June. Production in OECD countries and in the United States reached its highest level since April 2020.
At the same time, factory activity in China continued to decline in August due to the imposition of new restrictions to combat “Covid-19”, the worst heat wave in decades, and the faltering real estate sector, which negatively affects production, and indicates that the economy is struggling to maintain momentum .
On the other hand, the White House said, on Wednesday evening, that the finance ministers of the Group of Seven rich countries will discuss a proposal from the administration of US President Joe Biden to impose a price ceiling for Russian oil when they meet on Friday. White House spokeswoman Karen-Jean-Pierre told reporters: “We believe that this is the most effective way to inflict a severe negative impact on (Russian President Vladimir) Putin’s revenues, and doing this will result in not only a decline in Putin’s oil revenues, but also global energy prices. The proposal will be discussed this week at the G7 finance ministers meeting, which will be held on Friday.”
The G7 leaders are discussing how to formulate such a price ceiling and are studying other alternatives, including blocking the transportation of Russian oil. The Group of Seven includes the United States, Germany, Japan, Italy, Britain, France and Canada.
The International Energy Agency said last month that although Russia’s oil exports hit their lowest levels since last August, export revenue in June increased by $700 million on a monthly basis due to higher prices, up 40 percent over last year’s average.
Western leaders have suggested addressing this by imposing a ceiling on oil prices to limit the amount of money refiners and traders can pay for Russian oil, a move Moscow says it will not comply with and could thwart by shipping oil to countries that do not meet the price cap.
G7 members are seeking ways to plug energy shortages and beat sharp price hikes while sticking to their climate pledges amid tensions with Russia.