OPEC+ will remain the leading factor in oil price movements in the next few months, a senior Vitol executive told the media, as quoted by Bloomberg.
“Control of pricing is very much in the hands of OPEC+,” said Mike Muller, the head of Vitol’s Asian operations. In the United States, he said, “the rig count is simply not there for production to catch up in a way that would be necessary if you needed extra oil.”
That’s quite a table-turning from just three years ago when the U.S., thanks to its second shale oil boom, was considered the leading factor in oil prices as the boom turned the country into the largest oil producer globally.
Crude oil rose closer to $80 at the end of last week, ahead of today’s OPEC+ meeting where it will discuss the next steps in production control. According to some analysts, OPEC+ is unlikely to acquiesce to requests to add more production and bring down prices, not just because it benefits from higher prices but because some members of the cartel simply cannot boost their production capacity so quickly and they don’t have that kind of oil in storage to keep supply higher.
“The near-term price outlook remains supportive,” Stephen Brennock from oil broker PVM told Reuters on Friday. “The current price trend is one for recovery.”
“Whichever way you cut it; shorting oil is only for the brave with very deep pockets,” according to OANDA analyst Jeffrey Halley.
This oil market dynamics may remain in place for longer if the winter in the northern hemisphere turns out as cold as expected. With gas reserves running lower than the five-year average in Europe and energy shortages in China forcing factory shutdowns and fear of blackouts, demand for oil is likely to remain robust for quite some time despite gloomy long-term predictions. And this means OPEC+ will continue calling the shots, led by the members with the most spare capacity.