The unexpected OPEC+ move from last week and the subsequent oil price surge showed that the alliance is in control of the oil market, according to Vitol Group, the world’s largest independent oil trader.
“The market is telling us that OPEC+ have control,” Mike Muller, the head of Vitol’s operations in Asia, said at the Daily Energy Markets Forum hosted by Gulf Intelligence on Sunday.
“We’re going to get a stock-draw that is going to accelerate through the second quarter and that’s why the market is doing what it’s doing,” Vitol’s executive said, as carried by Bloomberg.
Last week, the OPEC+ group surprised the market by deciding not to lift collective crude oil production from April, leaving only small exemptions to Russia and Kazakhstan, as it did in its January meeting. Russia and Kazakhstan are allowed to boost their respective production by 130,000 bpd and 20,000 bpd, respectively, in April.
The market was expecting quite a different outcome from the meeting, including Saudi Arabia reversing its extra cut and the group lifting production by as much as 500,000 bpd. Saudi Arabia, however, is keeping its extra 1-million-bpd cut into April.
It looks like Saudi Energy Minister, Prince Abdulaziz bin Salman, was right when he said more than two weeks ago: “Those who are trying to predict the next move of OPEC+, to those I say, don’t try to predict the unpredictable.”
The market and analysts were surprised by the OPEC+ decision last week, with experts saying that the coalition is looking to tighten the market, betting on U.S. shale will not respond with surging production to oil prices at $65.
According to Vitol’s Muller, American oil production is unlikely to rebound to the levels from 2019 soon.
“U.S. rig counts are still nowhere close to supporting the U.S. returning to anywhere like the 13 million barrels a day we closed 2019 at,” he said on the online webinar.
By Tsvetana Paraskova for Oilprice.com
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