The OPEC is reported to have offered American shale oil companies to join the Vienna Accord, also known as the OPEC+, which is the agreement designed to cap the production of crude oil and restore the market balance for the sake of higher oil prices in the future. However, some experts say that they won’t agree to do so even if they are threatened.
For those of you who don’t know, the agreement implies capping their oil production voluntarily to make oil prices grow and let those oil producers make more money form their oil exports at the end of the day. However, the most interesting part is that the OPEC is going to announce some emergency measures if their American peers refuse to join the agreement in the near future. However, like I said before, American shale companies are not going to agree no matter what the cartel does.
At the same time, NordFX reports that the oil market was bullish yesterday. In particular, the Brent futures for December delivery were trading around $56,7/b earlier on Thursday. WTI gained some value as well
According NordFX analysts, the price rally has been backed by Saudi Arabia’s announcement of future oil export cuts. Not so long ago, Saudi Aramco announced an intention to implement the biggest oil export cuts in history in order to push oil prices higher. They say the export cuts will reach 560K barrels a day. All in all, Saudi Arabia is planning to export 7,15 million barrels a day even though the demand is around 7,7 million barrels a day.
Some experts say there is no need to treat this announcement too seriously. Some of them say that it’s hard to call 7,15 million barrels a day a new record low since in July alone they exported 6,60 million barrels a day. That’s why they think that the export is going to grow after the summer decline. Other experts believe that the Saudis are trying to play with the market while getting ready for the next OPEC summit scheduled for November 30th in Vienna.
American Shale Companies’ Decision Matters
In 2017 and 2018, the OPEC expects an increase in the global demand for crude oil by 30K b/d. Given the fact that the forecasts are improving, the global demand is expected to reach 96,8 million b/d, which is +1,5% as opposed to 2016. They also expect the global demand to reach 98,19 million b/d in 2018.
It is interesting to note that, unlike the OPEC, independent observers don’t see any reasons for higher oil prices in the near future. Even the IMF revised their forecast by lowering the average expected price form $55 b/d down to $50 b/d. The Fund’s experts say that despite the OPEC+ agreement, oil prices are still under pressure because of the unexpectedly high production of shale oil in the United States. That said, if American shale companies decide to join the agreement, this may change the game.
