The reason for the rise in prices for Brent and WTI oil was the announcement of the decision of the OPEC + countries to reduce production, Evgeny Shatov, partner at Capital Lab, told Izvestia on April 3. According to him, in April, in the absence of additional shocks, the price may fluctuate in the range of $83-85 per barrel.
As the expert noted, if we take into account the previously announced reduction of the Russian Federation, then in total, in connection with the decision of several more countries, 1.6 million barrels per day (b / d) will leave the market. According to him, this is a significant amount.
“Since early 2023, the oil market has been in surplus, so OPEC+’s cuts look preemptive. It is likely that OPEC + members expect a recession in the global economy, which has intensified against the backdrop of problems in the banking sector in the US, and, as a result, this may lead to a slowdown in oil demand. The decision to adjust the offer in advance was made in order to prevent a collapse in quotations,” Shatov explained.
At the same time, he clarified that the real losses for the market at a time will be less than the amount of reduction, because many states do not fulfill quotas and the reduction will begin only in May, but some of the physical volumes will still go away.
“Therefore, one should hardly expect a sharp surge in prices in April, probably a price fluctuation in the range of $83-85 per barrel, in the absence of additional shocks. These include the acceleration of the pace of China’s recovery, for example, and as a result, a sharp jump in demand for oil,” Shatov concluded.
On April 3, the cost of oil on world markets increased by more than 5%. So, on the ICE exchange at 01:09 Moscow time, the price of Brent exceeded $85 per barrel, WTI – $81 per barrel. According to the exchange at 12:22 Moscow time, the price of Brent oil dropped to $84.3 per barrel, WTI – $80 per barrel.
On the eve of April 2, several OPEC + countries announced a voluntary reduction in oil production from May until the end of this year. Thus, Saudi Arabia will reduce production by 500,000 bpd, the UAE — by 144,000 bpd, Iraq — by 211,000 bpd, Kuwait — by 128,000 bpd, Oman — by 40,000 bpd. b/d, Algeria – by 48 thousand b/d, Kazakhstan – by 78 thousand b/d, Russia, in turn, extended the current decision to reduce production by 500 thousand b/d. until the end of 2023.
At the same time, the US National Security Council considers such a decision of the OPEC + member countries to be ineffective against the backdrop of an unstable situation in the energy market. The Wall Street Journal published material with a corresponding statement from the council.
Earlier, on October 5 last year, OPEC + members already agreed to cut oil production by 2 million barrels per day starting in November, extending the deal until the end of 2023.
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