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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My rationale for predicting correctly what OPEC+ decision will be was “that Saudi Arabia will push for an extension of the current production cuts at least until the end of April to maintain the recent momentum of oil prices. I also said that Russia may not object to this simply because it has yet to benefit from the 125,000 barrels a day (b/d) of increased production granted to it by OPEC+ in February because of exceptional weather conditions in Siberia affecting production”.
OPEC+ has been in full control of the market since the 10 million barrels a day production cuts it made in April last year. Only OPEC+ stood between the pandemic and the virtual collapse of the global oil market and the global oil industry.
The US shale oil industry could hardly expect to stage a comeback soon. The crucial situation facing it is that its fate is now in the hands of OPEC+. Were OPEC+ to go for market share, prices will fall and this will immediately and very adversely impact on shale oil production.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London
To say "the USA exported no oil from the Gulf of Mexico last Month, February 2021" I believe would be factually correct. Having said that the USA has been a regular exporter of oil of on or about 3 million barrels or 300 million gallons of straight up crude oil per day going on a long time now. This in and of itself is very energy intensive and might explain the sudden jump in fuel prices in the USA to start 2021.