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Options Limited for Opec-Plus as Prices Surge

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Consumers are not the only ones who don't want to see a return of $100 oil. As benchmark Brent flirted with $90 per barrel this week, some Opec-plus members worried that a further price spike could hurt oil demand. But the producer group thinks its hands are tied in terms of preventing further price increases. Its formal policy already calls for adding 400,000 barrels per day per month to meet rising demand. However, this program is also draining global spare capacity and feeding the bullish sentiment in oil markets. Some Opec-plus members believe the recent rise in prices has nothing to do with supply and demand fundamentals, and everything to do with factors that are out of their control. These include increased geopolitical tensions including uncertainty about the fate of a new nuclear deal with Iran and the recent deadly Houthi attack on Opec member state the United Arab Emirates. "The fundamentals do not support these increases. The market is well supplied, therefore I expect a correction soon," Oman's Oil Minister Mohammed al-Rumhy told Energy Intelligence this week. Energy Intelligence understands that Opec-plus officials are holding talks on the issue of high prices and will continue to meet monthly to assess market fundamentals. But for now, the options are limited on what can be done to cool off the market. Adding more supply would highlight the spare capacity issue, which is already in focus due to Opec-plus' inability to raise production by its promised increments of 400,000 b/d due to operational, technical and other problems among some members.

Topic:
Oil Inventories
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