A MAJOR question that comes to mind is - What level will the oil price reach or remain at? Today, the North Sea Brent stands at $81 per barrel, but there are no indications about the price level in the future. How far will it go? Will it hit the $90 level, which is a difference of about $10 per barrel from the current price. There are several factors that speculators take into account, mainly China, which seems to represent a global factor for higher demand and therefore pushes the oil prices and stimulates demand.

This could contribute to releasing the oil volume that has been kept away from the market in order to improve the prices and bring order to the oversupplied market. OPEC+ did succeed in bringing order and discipline, and assured full compliance from its members. In the next few days, the organization will meet to discuss and review the conditions in the oil market, assess forecasts for the year’s balance, and decide what action to take. It will take into account the incoming oil volumes from non- OPEC+ producers and newcomers such as Brazil. However, the United States, which is the biggest crude oil producer with 13.5 million barrels per day, is expanding its presence in the Indian market alongside Brazil. This move aims to secure stable markets for these two crude oils, potentially placing them in competition with the crudes of OPEC+ that have traditionally dominated the Asian oil market. This scenario may not persist if the global demand for oil picks up to the extent of prompting OPEC+ to release their stored oil, and cancel their quota system temporarily. If such a scenario takes place, it will push the oil price to reach $90 a barrel.

However, this will lead to an influx of new crude volume into the market from various parts of the world, causing a decline in oil price, and restarting the cycle. If such a scenario takes place again, OPEC+ will likely need to act swiftly to restore order and discipline to the oil market. It is hard to predict how high or how low the oil price will get in the next five months, but they can certainly agree on retaining the oil price level at a minimum of $80 per barrel, as it is unlikely for the prices to fall below this level.

By Kamel Al-Harami
Independent Oil Analyst

Email: [email protected]