The impact of the OPEC+ announcement should be limited: shaken by American competition, the group now only controls half of global crude production.
( GETTY IMAGES NORTH AMERICA / BRANDON BELL )
No reopening of the floodgates. OPEC+ announced on Sunday November 3 an extension of voluntary oil production cuts until the end of December, while oil prices are at half mast.
The eight countries “agreed to extend by one month
their additional voluntary production reductions of 2.2 million barrels per day
“, the alliance said in a statement. In addition to Saudi Arabia and Russia, Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria and Oman are concerned.
This decision aims to support prices,
the American WTI and Brent are around 70 dollars
faced with uncertain demand, far from the targeted threshold of 80 euros. “This is the logical consequence of the persistent downward pressure on prices due to the gloomy demand outlook in China and around the world,” commented for the
AFP
Ipek Ozkardeskaya, analyst at Swissquote Bank.
The impact of the OPEC+ announcement should however be limited, she believes, while the group's “strategy of restrictions” is struggling to bear fruit. Because its 22 members, shaken by American competition,
now control barely half of global crude oil production.
“Trade war”
The Organization of the Petroleum Exporting Countries (OPEC), led by Saudi Arabia, and their allies led by Moscow, entered into an agreement called OPEC+ in 2016 to better influence the market. This alliance currently keeps nearly six million barrels underground through three different mechanisms, both group-wide and in the form of voluntary cuts.
All the ministers are due to meet at the beginning of December in Vienna, headquarters of OPEC.
At the beginning of June, during the last meeting, they announced their desire to increase their production from October. With Sunday's announcement,
the reopening of the black gold taps will therefore take place three months late
on schedule. The alliance, however, took care to create a way out, insisting on several occasions that this decision could be reviewed at any time.
OPEC+ has chosen to delay while waiting for
US election results “which will have a significant impact on the market”
estimates Jorge Leon, analyst at Rystad Energy.
“I don't know if the group has a preference between Donald Trump and Kamala Harris” but the Republican's victory would “probably” lead to a “trade war” which “would weigh on demand, enough to undermine economic growth and therefore prices oil”.
