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Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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Has OPEC Found Its Oil Price Sweet Spot?

Most OPEC members seem to be quite happy with where oil prices are now, according to the energy minister of one of the smaller members of the cartel.

"We all probably would like higher [oil prices] because we have more revenue, but we are conscious this is not good for the economy," Equatorial Guinea’s Gabriel Obiang Lima told media, as quoted by S&P Global Platts. "It depends on who you ask, but I think the consensus is that that $60-70/b is OK for producers and for consumers," he said.

The comments by the Equatorial Guinea official seem to reflect the general sentiment on oil markets. As Lima noted, anything below $60 begins to put a strain on most OPEC budgets. Anything above $70 prompts complaints from large consumers such as India and, notoriously, the U.S., with President Trump taking to Twitter several times during his term to insist that OPEC take care to push prices lower.

However, it appears that while happy with current prices, many OPEC members have production expansion plans. This includes Equatorial Guinea, which at the moment pumps around 120,000 bpd. The current output is expected to be boosted by another 20,000 bpd by the end of the year despite OPEC-wide production cuts.

Iraq also has plans for a production boost and so do Nigeria and Libya, to mention but a few. At the same time, non-OPEC supply is set to continue growing even though many analysts expect U.S. production growth to slow down. Norway, Brazil, Canada, and the newcomer Guyana are among the oil producers that are expected to boost their production substantially this year.

Add to this Russia, which has indicated clearly enough it would rather boost production than keep cutting it, and OPEC may be facing important decisions to be made later this year.

The cartel and its partners are meeting in march to discuss the progress of their production cut agreement and its future.

By Irina Slav for Oilprice.com

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  • Mamdouh Salameh on January 13 2020 said:
    Don’t believe a word of it. OPEC members with the exception of Kuwait and Qatar need oil prices above $80 a barrel to balance their budgets.

    The oil minister of Equatorial Guinea’s Gabriel Obiang Lima and those in the global oil market who support an oil price ranging from $60-$70 should take a master class in the economics of oil. They should study in particular the 2014 oil price crash and its adverse implications for the global economy.

    They will then learn that the global economy can’t reconcile itself with low oil prices. The reason is that the three biggest chunks that make up the global economy, namely the global oil industry, the economies of the oil-producing countries and global investments will be undermined as we have seen in the aftermath of the 2014 oil price crash.

    A fair oil price ranges from $100-$120 a barrel. Such a price stimulates the global economy by enhancing global investments, enables the oil-producing nations to earn more revenue and thus balance their budgets and expand expenditure and investments and also enables the global oil industry to balance its books and finance more projects around the world.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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