May 17, 2022

Dubai Week

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The "OPEC Plus" consortium is heading for a slight increase in its oil production

The “OPEC Plus” consortium is heading for a slight increase in its oil production

The “OPEC Plus” countries will begin the monthly meeting of the oil community on Thursday, which is facing less urgent pressure to increase crude production, which was offset by the fall in oil prices in the wake of a raging war in Ukraine. Closing operations in China.

Almost every month since the outbreak of the Kovit-19 epidemic, the 13 member states of the Riyadh – led Organization of Petroleum Exporting Countries meet with ten of the Moscow – led Organization’s partner countries on Thursday, via video link. To make possible changes in their production policies.

Since the start of the Russian invasion of Ukraine on February 24, there has been an increase in calls for markets to relax in the wake of tight supplies and talks about a possible embargo on Russian oil in the wake of rising oil prices.

So far, these demands have not been heeded, and this time around, the “OPEC Plus” federation will argue that the demand for black gold is declining and the situation will continue.

Many analysts say that OPEC Plus, which was established in 2016 to regulate the market, will be satisfied with a small increase in production of about 400,000 barrels per day.

Therefore, the federation will continue to pursue its strategy of gradually increasing its oil production, which began to be implemented in May 2021, in the wake of the economic recovery from the aftermath of the epidemic, which then required a sharp reduction in production. Demand decline.

Inflation and Govt

Since the last meeting on March 31, prices have been in the same range and range from $ 97 to $ 115 a barrel for European standard Brent North Sea crude and $ 92 to $ 110 for the US standard WTI.

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Recently, the German commercial bank “Commerzbank”, Carsten Fritsch, recorded a decline in crude oil prices, “in the wake of fears that the return of closure measures due to the outbreak of the corona virus in China will restrict oil demand in this country.”

China is facing the worst outbreak of the virus since the spring of 2020 and has taken drastic measures, especially in Shanghai, where authorities ordered 25 million people to stay home a month ago.

China is the second largest consumer of crude oil in the world, and the largest importer.

Among the factors affecting the market is fears of a global recession due to the ongoing war in Ukraine.

At the end of April, the International Monetary Fund lowered its forecast for global growth to 2022 due to the effects of the conflict in Ukraine, particularly rapid inflation that undermined consumer purchasing power.

In this turbulent situation, the “OPEC Plus” group has lowered expectations for global oil demand.

Reducing supply

Markets are still tense, and John Plassard, an expert at Mirabat Asset Management Corporation, said, “OPEC Plus group member states face difficulties in achieving their production targets.”

Libya, which has the largest oil reserves in Africa, is experiencing a serious and protracted political-constitutional crisis that has led to the closure of oil facilities.

In mid-April, the National Oil Corporation, a government agency, shut down operations at two important oil ports in the east of the country and closed several oil fields.

In an interview with Agency France-Presse, Mohamed Aoun, Minister of Oil and Gas of the National Unity Government based in Tripoli, said, “Production has fallen by about 600,000 barrels a day, which is about half that.”

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In another development that could affect markets, the EU is seeking a gradual ban on oil purchases from Moscow as part of a reduction in European funding for Russia in response to the ongoing war in Ukraine.

By 2021, the European Union will import 30 percent of its crude oil demand and 15 percent of its oil derivation requirements from Russia.

The “expertise” group said the ban, “likely,” does not appear to be in line with the position of the “OPEC Plus” camp, which is “ready to accelerate the pace of its oil production, thus reducing supply and causing oil prices to remain high.”

(AFP)