The table is set for a new Opec meeting: – More people see Saudi Arabia as the rescue

The table is set for a new Opec meeting: – More people see Saudi Arabia as the rescue
The table is set for a new Opec meeting: – More people see Saudi Arabia as the rescue

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On Thursday, the oil giants in Opec + will meet to set production targets for the month of May.

In the previous meeting, daily production was cut by eight million barrels, and Saudi Arabia was by far the largest contributor with a voluntary cut of one million barrels a day.

Energy analyst and partner Nadia Wiggen at the brokerage house Pareto Securities believes the most likely scenario is that the current production level will be extended for another month, unless Saudi Arabia has several positive surprises lurking.

Wiggen thinks it will be exciting to see if Opec looks up and looks ahead. By the end of 2021, demand is expected to increase by six to eight million barrels a day.

– It will be exciting to hear if there is anything about future prospects tomorrow. One scenario is that demand will increase by two million barrels day by month, so the question that remains is when this jump comes. June? July? It remains to be seen, and that is the reason why Opec still holds monthly meetings, says Wiggen.

Do not think Russia will challenge

Over the past year, the oil producers’ coalition Opec + has held monthly meetings in an attempt to save the oil price, which took a swallow when the corona pandemic broke out.

Opec + consists of the original Opec countries such as Saudi Arabia, Kuwait and Iran, as well as ten other countries. Among these, Russia is by far the largest – and also most reluctant to cut its own production.

Wiggen, on the other hand, believes that Russia will hardly dare to challenge Saudi Arabia at Thursday’s meeting, and points out that the country is in a difficult political situation.

– Several Opec countries also see Saudi Arabia as the rescue, which is very good for the country both politically and for Saudi Ramco, she points out. Saudi Aramco is the state oil company in Saudi Arabia, and the most valuable oil company in the world.



The picture shows the development in the oil price from 1 April last year to 31 March this year. On April 1 last year, the price was down to 25 dollars a barrel. (Photo: DN Investor)
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Do not fear the United States

Wiggen adds that neither Russia nor Saudi Arabia fear competition from the United States, which does not cooperate on production cuts. This impression was strengthened on Wednesday after the news that the US produces less oil than expected.

Since the price collapse last spring, the United States has strengthened its oil production to 11.1 million barrels a day, which is 1.9 million barrels less than last year.

Wiggen says that American production is expected to increase by 600,000 barrels of oil. If the oil price stays above 70 dollars, they will only be able to increase by another 600,000 barrels.

– We expect that demand will pick up by six million barrels a day by the end of 2021, and that oil must come from somewhere. When it is expected that the USA will increase production by 600,000 barrels, it means that the oil must come from Opec, says Wiggen.

Therefore, the price of American oil became negative
The producers pay the buyers so that they get rid of the new production.

01:10
Published:

22.04.20 — 02:06

“A reminder for the oil market”

The price of oil has risen sharply so far this year. At the beginning of the year, a barrel of North Sea oil cost around $ 50 a barrel. Thursday morning, the price is around $ 63.5. This is still lower than the peak earlier in March when the oil price sniffed in the 70s.

Commodity analysis manager Bjarne Schieldrop in SEB writes in a report that the meeting is a reminder to the oil market that prices today are solely due to previous and ongoing production cuts.

– If it had not been for these cuts implemented by Opec +, the oil price would not have been more than 30 dollars a barrel, Schieldrop writes.

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That was the price of North Sea oil in May last year, indicated by Brent Spot. At its lowest, the price was down to 20 dollars a barrel, but has since strengthened to 65 dollars a barrel. It is at the same price level as at the end of 2019.

Wiggen disagrees with the claim, and believes that even if the oil price could have fallen to 30 dollars a barrel without the production cuts, it would have strengthened somewhat given the setback American oil producers went through last year. She believes Canada and other Opec members must have cut production anyway, while Russia could not have politically tolerated such a low price level.

– We also see global demand increasing quarter by quarter, despite weak vaccine rollout, and it is likely to push prices up, she adds. (Terms)Copyright Dagens Næringsliv AS and / or our suppliers. We would like you to share our cases using a link, which leads directly to our pages. Copying or other form of use of all or part of the content, can only take place with written permission or as permitted by law. For further terms see here.

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