Why is the barrel of oil still climbing?

(Boursier.com) – Crude prices rose on Tuesday for the third consecutive session in a market again worried about a shortage of supply, and while OPEC+ will meet on Thursday to decide on its production quotas. The barrel of American light crude oil (WTI) for August delivery gained 2% to $111.76 on the Nymex while a barrel of Brent North Sea (August maturity) advanced 2.5% to $117.98 in London.

Libya is seeing its exports again disrupted by the deepening political crisis, while anti-government protests in Ecuador threaten to halt production in the country. A former OPEC member, Quito was pumping around 520,000 barrels a day before the political unrest began. Any interruption in supply could have repercussions on the global black gold market, which remains tense to say the least, between on the one hand an increase in demand boosted by the post-Covid economic rebound and on the other, disrupted trade flows following the war in Ukraine. Some members of OPEC+ are also struggling to meet their production targets, which exacerbates tensions.

Thus, according to the report of the technical committee of OPEC +, published Tuesday evening and which will serve as a basis for the meeting on Thursday, the Alliance of producing countries did not manage to produce the quotas which it had fixed for May and should not reach them in June either. In May, the call was shorted by 2.7 million barrels per day, while OPEC + had decided to increase its production by 432,000 barrels per day. Under these conditions, the markets doubt the ability of OPEC+ (which includes Russia) to produce enough crude to meet global demand.

“Structural shortages are still unresolved,” Stephen Innes, managing partner at SPI Asset Management, told ‘Bloomberg’. “More barrels need to come to market for oil prices to come down significantly and steadily.”

The prospect of additional supply from two of OPEC’s top producers also appears limited. On the sidelines of the G7, Emmanuel Macron indeed told his American counterpart Joe Biden that the United Arab Emirates and Saudi Arabia were already pumping almost as much as they could. The French president was relaying a conversation he had with the leader of the United Arab Emirates, Sheikh Mohammed bin Zayed, the news agency said. The two Gulf states are believed to be the only two countries in the Organization of the Petroleum Exporting Countries with spare capacity available to compensate for the loss of Russian supply and weak production from other member countries. OPEC+ ministers meet on Thursday for their next monthly meeting.

The leaders of the G7 also announced on Tuesday that they would put in place a mechanism to cap Russian oil prices. The move will be part of a broader campaign to stifle Russia’s profits from its energy exports that help fund its war against Ukraine.