2024-09-19 08:07:50
Its prices are registering a significant drop today oil with Brent still moving slightly above $72 a barrel for November delivery contracts and US crude below $70 for October delivery.
Black gold prices have fallen about 18% from early July highs and more than 24% since the end of 2023 on concerns about weak demand in China and the US.
However, the market expects today two announcements in the United States, which will affect the course of prices: First, the announcement in the afternoon on the American strategic reserves and shortly after the decision of the Fed for the first rate cut in four years.
U.S. crude oil inventories rose by two million barrels last week, according to the American Petroleum Institute (API). Investors also expect the Federal Reserve to announce a cut in key interest rates by 25 or even 50 basis points.
What seems strange, however, is that oil is moving at relatively low levels, despite the fact that there are several factors that should normally increase prices a lot.
Analysts at Capital Economics explain that oil prices have fallen despite his decision OPEC+ to maintain production cuts. But not even the escalation of tension in the Middle East after the explosions in Lebanon, the war in Ukraine and the loss of about 600,000 barrels per day of Libyan production, prevented prices from falling.
The geography of oil is changing
The reason is that crude oil production is now increasing in America – in the USA, Canada, Brazil, Guyana, but also in Argentina – covering any OPEC cuts. As the International Energy Agency (IEA) announced, the market this month will be well supplied with oil, because the production in the countries of America covers the global demand. “In this way, the market changes hands: the strict control of OPEC is reduced, as the market becomes more competitive”, stress energy sources.
The latest figures reveal that OPEC’s market share of total production could drop to 28-30%.
OECD countries, led by the US, currently hold a quota similar to that of OPEC. Nevertheless, the cartel still has a certain advantage, since with Russia’s participation in OPEC+ its market share exceeds 35%.
“The market share of OPEC+ is however at the lowest level since its creation”, as the International Energy Organization explains.
BCA Research even forecasts non-OPEC+ supply to increase by around 3 million barrels per day over the next five years – enough to meet 80% of global demand growth over that period.”
Centrifugal trends
“Lower global demand growth, together with OPEC+’s excess production capacity, may even become the cartel’s Achilles heel in maintaining compliance with quotas in the event of cuts, market players point out. BCA Research explains that “discipline in any cartel is more difficult to maintain if the promise of meeting future demand growth turns into a war for market share.
“Ultimately, OPEC+ will have to cut production even more to boost oil prices. But having already cut its production by 11.5%, additional cuts would increase disagreements within the cartel, as there are countries that want to produce more, lest they continue to lose market share,” BCA Research analysts explain .