OPEC exporters may beat the target related to the OPEC+ agreement, which now seems to be a point of concern for international investors, The Wall Street Journal reports.
There is almost 100% certainty that the OPEC and some non-OPEC oil exporters led by Russia are going to extend the OPEC+ agreement (including the 2% production cap) during the OPEC summit in Vienna scheduled for November 30th. However, both OPEC members and international community cannot be sure that the deal extension will manage to keep supporting oil prices relatively high over an extended period of time. Chances are, the decision to extend the deal all the way up until the end of 2018 may trigger a too rapid oil rally. If that’s the case, we’ll see a rapid drop in the global demand for crude oil, and that’s something no oil exporter wants to see.
Merchant Commodity representative Doug King doesn’t deny a rally up to $70/b in the coming weeks. Over the last 3 months, oil prices have gone up by 20%. Brent oil exceeded $63/b while WTI oil nearly reached $59/b over the same reporting period. These are major highs – the highest price levels since June 2015, NordFX experts report.
At the same time, the OPEC+ deal signed last year now seem to have backed higher oil prices as expected, even though it took more time than expected. Indeed, oil prices have been accelerating for a while. This is something that started worrying Saudi Arabia and some other major oil exporters. They don’t wont oil prices to rally too fast since this may scary away oil importers.
The bottom line is that the OPEC and their peers may “overdo it”, which may trigger a bigger demand for electro-cars and other green technologies independent from fossil fuels like crude oil.
On top of that, American shale oil companies may try to take advantage of the situation. Baker Hughes reports that the amount of functioning American oil rigs increased by 9 units up to 747 units over the past week.
