(News Bulletin 247) – In the absence of sufficiently high demand, market observers believe that oil prices will not rise again soon, even with the production cuts implemented by OPEC+ members.

The figures fluctuate slightly, but there is consensus on the trend: due to lack of sufficient demand, the price of black gold is not about to rise again despite the production cuts made by OPEC+ member countries.

Faced with this puzzle, “visions diverge” on the strategy to adopt during the next meeting of the 22 ministers of the Organization of the Petroleum Exporting Countries and their allies, scheduled online next Thursday, comments for AFP Jorge Leon, from Rystad Energy.

The meeting initially scheduled for Sunday has been postponed. A way of giving “more time” to member countries to align, according to the analyst.

Before the announcement of this postponement, the market was betting on an extension of the cuts by two or three months, citing the “lack of space on the market” for new volumes.

To avoid a price collapse, eight member countries, including Saudi Arabia and Russia, have already had to postpone the reintroduction onto the market of 2.2 million barrels withdrawn in addition to the quotas of the entire country. ‘alliance.

Since the end of 2022, the cartel has been organizing a strategy to reduce supply. It produces around 41 million barrels per day, compared to “a true capacity of around 47 million”, Francis Perrin, research director at the French Institute of International Relations (Ifri), told AFP.

OPEC+ is using “all the levers at its disposal”, underlines Amr Osman, independent oil and gas consultant, but the slowdown in the leading importer of black gold, China, weighed down by sluggish consumption and a severe oil crisis real estate, weighs down prices.

The rise of American shale oil

At the same time, “volumes and the number of producers outside OPEC+ are increasing,” explains Giovanni Stauvono at UBS. Particularly in the United States, now where the logic of the multiplicity of private companies – in opposition to the national companies of many cartel countries – leads to a competitive situation favoring production.

Over the last ten years, “the rise of American shale oil has made the United States the world’s leading producer ahead of Russia and Saudi Arabia,” recalls Mr. Perrin.

According to data from the International Energy Agency (IEA), the share of American crude oil represented 11% of global production in 2016, when OPEC allied with ten countries to form OPEC+, compared to 16% now. In the same period, the cumulative share of cartel countries fell from 62% to 56%.

By taking into account unconventional oil, American growth is even more evident, supported by the United States’ desire for energy independence. With the vast majority of oil being used within the country, “the government has every interest in low prices which benefit the end consumer,” explains Amr Osman.

The upcoming presidency of Donald Trump is expected to accelerate this trend. During his campaign, he summed up his vision regarding energy production with the phrase “drill, baby, drill!”, a clear signal in favor of fossil fuels.

An “unsustainable” strategy

Under these conditions, “the OPEC+ strategy is not tenable”, believes Jorge Leon, the organization cannot indefinitely cut its production without losing too much revenue and influence on prices, as its share of market is eroding.

For many members of the cartel, notably the Gulf countries, “oil revenue supports the whole of society: the modernization and diversification of their economies and social balances”, specifies Francis Perrin. Some countries, such as the United Arab Emirates and Kazakhstan, would like to develop new oil projects and are putting pressure to produce more.

Maintaining cuts also favors other market players who deploy as many barrels as possible at relatively advantageous prices. Aware of this problem, OPEC+ took care, while pushing back the deadline, to display its desire to gradually reopen the floodgates.

“A message to American shale producers to encourage them to be cautious in their investments,” comments Giovanni Stauvono in a UBS note, with the idea that OPEC+ can reintroduce large quantities of oil at any time and cause a fall the profitability of new projects.

Many observers see the prices of WTI and Brent evolving around $60 next year, far from the coveted 80 euros.

(With AFP)