Fuel prices are not likely to come down in the coming weeks, or at least not under the impetus of the oil giants. The twenty-three members of the OPEC + alliance decided on Wednesday to continue to open their floodgates only slightly in March, despite the soaring prices of black gold, and the geopolitical tensions that are causing pose a threat to supply. Representatives of the thirteen members of the Organization of the Petroleum Exporting Countries (OPEC) and their ten allies via the OPEC+ agreement simply agreed “to adjust their total production level of 400,000 barrels per day for the month of March”, OPEC announced in a statement after a brief meeting, the outcome of which was widely anticipated. A goal that may not even be achieved.
This gradual strategy, renewed from month to month, was initiated in the spring of 2021 thanks to the recovery in demand, after drastic cuts to deal with the Covid-19 pandemic. OPEC+ has never strayed from its line despite calls in the fall from the White House to loosen the tap further in order to calm the surge in prices.
Demand growth
Since the last meeting of the organization, the price of a barrel of West Texas Intermediate (WTI) has climbed by more than 17% and that of Brent by more than 14%, the two crude benchmarks reaching in January new highs for more seven years old. At 2 p.m. on Wednesday, Brent again exceeded the symbolic bar of 90 dollars. A measure that it had already exceeded last week, which the investment bank Goldman Sachs predicted last month. The latter even presages that the 100 dollars will be reached this summer.
A report prepared for the meeting, which Reuters was able to consult, maintains the forecast for world oil demand growth for 2022 at 4.2 million barrels per day and estimates that demand should recover in the second half of the year. pre-pandemic level of just over 100 million barrels per day.
Even if the increase announced is once again modest, the market fears “that OPEC + is not able” to meet its production targets, commented Bjornar Tonhaugen, an analyst at Rystad Energy. “A number of countries, such as Angola and Nigeria, are simply not in a position to increase their production any further,” confirms Carsten Fritsch of Commerzbank, and the other States do not wish to close the gap.
In December, total OPEC+ volume rose by just 90,000 barrels per day, well short of the target set at 400,000 barrels, according to a survey by the Bloomberg agency. For Louise Dickson, of Rystad Energy, the alliance of 23 holds the key to balancing “an oil market in need of supply” and stop the overheating of prices. “The only short-term solution will have to be led by Saudi Arabia, the producer with the largest spare capacity,” she points out.
Geopolitical tensions
The market is also boosted by strong geopolitical tensions involving behemoths in the production and export of black gold, which pose threats to supply. The United Arab Emirates on Monday intercepted a ballistic missile launched by Houthi rebels in response to a deadly airstrike carried out in Yemen by the Saudi-led military coalition.
But it is another escalation that occupies all minds: tensions are at their highest between Moscow and the West over Ukraine, on the border of which Russia has massed tens of thousands of soldiers and heavy weapons . “As long as the situation worsens, this crisis can only continue to escalate” prices, says Neil Wilson of Markets.com.
In order to bring down oil prices and thus see record pump prices start to fall again, eyes are now turned beyond the OPEC countries. The entry into the oil market from the United States, Brazil or even Canada could indeed create a little more surplus and thus ease tensions. But it will only happen gradually. Not sure that this is enough to offset the impact of geopolitical tensions and galloping demand.