The OPEC+ mining alliance is finding it increasingly difficult to control the demand and supply of “black gold”
The decisions of the OPEC+ ministerial conference held on June 1 caused conflicting responses. The market reacted with an 8 percent drop in stock prices. The US Federal Trade Commission (FTC) on the eve of the conference accused Saudi Arabia of a cartel agreement with American shale producers to raise prices. Investment bank Goldman Sachs and a number of Western media, on the contrary, pointed out that Riyadh succumbed to pressure from Washington to lower quotes.
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The FTC (an American antitrust authority founded in 1914 to combat oil companies specifically) in early May accused some shale companies of coordinating efforts with OPEC to “artificially keep production low” to help raise prices.
< p>In early June, a group of Democrats in the House of Representatives asked the Department of Justice to investigate allegations of antitrust behavior by American oil producers and OPEC. Democratic congressmen suspect that a number of major US oil companies have colluded to keep fuel prices high.
The US Trade Commission's suspicions of collusion between its shale producers and OPEC, formulated in early May, can still be explained by the relatively high oil prices that developed in the previous month. In the first half of April, Brent was quoted within $90–91 per barrel. Moreover, many experts then predicted a price rally that could reach $100 per barrel in the summer.
But the accusations of Democratic congressmen against OPEC in early June cannot but cause bewilderment — quotes went down, breaking through the level of $80 per barrel. Perhaps President Biden’s confidants are simply playing it safe — in order to prevent a noticeable jump in gasoline prices during the November elections, since this is extremely painful for local voters.
Of course, members of OPEC and OPEC+ are interested in maintaining fairly high level of oil prices. But it costs more to negotiate this with American shale producers. They will certainly be deceived.
In addition, the American administration has been persistently playing short in recent years. True, it is not always successful. Suffice it to recall the conflict of summer-autumn 2022. In July of that year, US President Joseph Biden, during a Middle East tour, met in Riyadh with Saudi King Salman bin Abdulaziz Al Saud and Crown Prince Mohammed bin Salman Al Saud.
Officially, dozens of bilateral agreements were discussed. In fact, as the US press claimed, Biden had been seeking to increase oil production in the kingdom by more than 1 million barrels per day since November 2022, when the largest oil production cuts in history under OPEC+ finally expired (minus 9, 7 million barrels per day in June of that year). It is also possible that the American president was persuading the royal family to conclude the Abraham Accords to normalize relations with Israel, which the UAE already did in September 2020. However, after the aggravation of the situation in Gaza, the prospects for such an agreement became illusory.
As for the growth of production, exactly the opposite happened: at the OPEC+ ministerial conference on October 5, 2022, Saudi Arabia and Russia decided on a sharp (by 2 million barrels per day) reduction in production quotas. True, half of the agreed volume remained on paper, as unrealized quotas were reduced. But production was actually reduced by 1 million barrels.
They say that Joe Biden was screaming and screaming with rage. Subsequently, in 2023 and early 2024, OPEC+ as a whole or individual members of the alliance withdrew about 5.8 million barrels of oil per day from the world market.
In other words, putting pressure on Riyadh is not so easy. Until 2016, when OPEC was supported by Russia, Saudi Arabia, under the influence of the United States, was still heading for a price collapse, as, for example, in 1986, when collapsing oil prices contributed to the aggravation of the economic crisis of the USSR. Afterwards, no longer.
So the indignation of Saudi Energy Minister Prince Abdul Aziz bin Salman at the accusations that his country has conceded to the Americans on the price issue is quite understandable.
Speaking at the session “The Future of the Oil and Gas Market: Global Demand Prospects and Producers’ Plans,” held on June 6 as part of the XXVII St. Petersburg International Economic Forum (SPIEF), bin Salman assessed the results of the latest OPEC+ ministerial conference: “Overall, the meeting was very successful . It was simply amazing.”
As for the negative assessments of the results of the oil summit, then, according to the Saudi minister, the Goldman Sachs report, which several times mentioned pressure towards lower prices, “from a professional point of view, is an incorrect interpretation of events.”
However. American market analysts also have their reasons. Previously, OPEC+ ministerial meetings in most cases led to higher prices. Thus, the meeting we already mentioned on October 5, 2022 took place against the backdrop of a one-day increase in Brent quotes by more than $1.5 per barrel. October 4 was $91.8; October 5 — $93.37. In general, in October of that year, prices increased by $10 per barrel.
Now there is a downward trend. In early April, let us remind you that more than $92 was recorded, which is why many experts started talking about $100. But already in May, prices crawled back to the range of 81–84 dollars per barrel. On the eve of the OPEC+ ministerial meeting, during it and a few days later, quotes for August Brent futures on the London ICE exchange fell by 8% to $77.
In this case, geopolitical factors and purely speculative financial transactions probably played their share of denial. But it is impossible to discount the decision of the June OPEC+ conference on the gradual, albeit gradual, year-long rollback of a number of voluntary production restrictions of 9 OPEC+ countries from the fourth quarter of this year, adopted in 2023 and estimated at 2.2 million barrels per day .
True, the final OPEC+ documents emphasize that the increase in production can be stopped at any time if the price situation worsens. But the word has been said. And the balance between supply and demand next year may shift significantly towards consumers. Moreover, forecasts for global demand growth are quite restrained. Even OPEC believes that in 2025 demand will grow at a slower rate than this year: instead of 2.2 million barrels per day. — 1.85 million
In addition, from January 1, 2025, it will increase by 300 thousand barrels per day. production quota for the UAE. But this will also happen gradually over 9 months.
The situation for OPEC+ is difficult. The alliance now controls almost 40% of global oil production. Two years ago — 44%. Therefore, constant production cuts, on the one hand, keep quotes acceptable for the alliance. On the other hand, voluntarily vacated market niches are occupied by competitors from countries outside OPEC+. This year, as is known, the United States (first place with 13 million barrels per day), Canada, and Guyana demonstrate rapid growth in oil production. OPEC+ cannot ignore this, given Angola’s withdrawal from the alliance. Although Brazil joined OPEC+ on January 1 of this year, it is not yet participating in restrictive agreements.
But, apparently, all is not lost. Abdul Aziz bin Salman presented a completely positive price forecast: “Give one or two days for everything to settle down, and reality will take its rightful place.”
He was echoed by Deputy Prime Minister Alexander Novak. He explained that the target (goal) of OPEC+ is not the actual price of oil, but the balance of supply and demand. And at the same time he gave a forecast of an increase in global demand by 2030 from the current $102 million to $110–115 million barrels per day.