Crude oil prices will continue rising this quarter as global oil inventories drawdowns continue and OPEC sticks to its limited addition output policy, Citi’s head of commodity research Ed Morse told Bloomberg.
Morse commented that it was funny how oil prices reacted following OEPC+’s latest announcement after its meeting on Thursday, going down instead of up as one would expect. He also noted that OPEC had moved from the role of the “central bank of oil” to the role of regulator, keeping a cap on supply to keep prices higher.
Asked whether OPEC+ had the capacity to increase production should demand growth accelerate at some point, Morse said that some OPEC+ members certainly had the capacity. While some members of the group had suffered a drop in production capacity due to underinvestment, he said Saudi Arabia, Russia, the UAE, and Kuwait could boost production quickly, by about 3 million bpd.
Yet OPEC is not the only player in the field, according to Morse. In fact, he thinks the U.S. could surprise everyone next year by ramping up production substantially. U.S. production, Morse said, could grow by a lot more than any individual OPEC country in 2022.
While the U.S. oil industry ramps up, however, the U.S. administration is experiencing an embarrassing moment, Morse also said, referring to the White House’s accusations towards OPEC of being responsible for bringing more oil to the market to keep retail fuel prices lower.
“This is an embarrassing moment for the U.S. government under the Biden administration, which has been not looking at fossil fuels,” Morse said, adding that production in the Permian was already back to pre-pandemic levels and about to “explode” with production next year.
In this context, Morse expects a year from now, OPEC may have to think about limiting production again as prices would fall dramatically from current levels.
By Irina Slav for Oilprice.com
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