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Oil Producers Turn the Screws as Market Tightens


These translations are done via Google Translate

OPEC+ members give no hints about a future easing of restrictions as prices reach six-month highs.

OPEC+ supply cuts are underpinning a steadily strengthening market for oil and gasoline.
OPEC+ supply cuts are underpinning a steadily strengthening market for oil and gasoline.
Bloomberg

You’d be forgiven for thinking that oil producers might have contemplated opening the taps a little when they met this past week. Think again.

Prices are at six-month highs and climbing. Market forecasts show a supply deficit for the rest of 2024. Gasoline in Europe and North America is up by 5%-10% this year, even as broader inflation levels are in retreat.

Brent crude is within touching distance of $90 a barrel, up nearly 3% on the week so far, and it’s likely to go higher. Banks including JPMorgan Chase & Co. are dusting off triple-digit oil price forecasts.

The producer group has slashed its overall output target by about 3.8 million barrels a day in the past 12 months, and the cuts will deepen over the course of this quarter as Russia switches from export restraints to tighter pumping limits.

The curbs haven’t been shared across the whole group. Only nine of the 23 members at the time offered “voluntary” reductions in the first half of last year, and some of those appeared to have been pressured into doing so. Call it a coalition of the (mostly) willing.

The Rising Cost of Driving

Index of retail gasoline prices in local currencies

Source: www.globalpetrolprices.comNote: US prices are more responsive to the oil market because European drivers pay high fixed taxes on gasoline. US drivers still pay about half as much per gallon as their European counterparts.
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GLJ

Another seven had decreases to their output targets imposed upon them at the start of 2024, when estimates of their ability to pump were lowered. That process triggered Angola’s departure from the group.

Yesterday’s Joint Ministerial Monitoring Committee meeting gave no hints about a future easing of restrictions.

Instead, it once again urged those who hadn’t implemented their cuts in full — particularly Iraq and Kazakhstan — to toe the line and provide details by April 30 of how they will compensate for earlier failures.

OPEC+ is due to hold a full ministerial meeting in June. A decision to extend the current supply quota into the second half of the year cannot be ruled out.

That may propel oil beyond $100 a barrel for the first time since August 2022.

–Julian Lee, Bloomberg News



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