After more than 2 years of coordinated production cuts, OPEC+ has reached the point when it no longer must increase production targets and needs to rethink the future of the 23-member oil group.
Most analysts expect no or just very moderate changes to the OPEC+ September 2022 production guidance – with June figures already reaching a hefty 320% compliance rate, incremental supply remains the main challenge for members.
The worsening demand outlook will play a part in OPEC+ decision making as the group wants to keep oil prices high enough to generate bumper profits without stymieing adequate supply to the market.
With Russia facing a series of sanctions from 2023 onwards and thus susceptible to sale drops, Saudi Arabia is seeking to keep OPEC+ as the oil market’s coordination force, preferring to avoid sudden market shocks as Riyadh has finally grown to enjoy a protracted windfall period.
Saudi Aramco has reportedly bought US lubricants producer Valvoline as it seeks to expand its foothold in the downstream business, for a reported sum of $2.65 billion.
One oil major after another is announcing phenomenal quarterly earnings and revved-up share buyback programs, with the likes of BP, Marathon, and Devon Energy joining the list this week.
Meanwhile, Brent prices have been bogged down at around the $100 per barrel mark so far this week in order to keep sentiment under control.
Should tomorrow’s OPEC+ meeting devolve into another campaign of smoke and mirrors, the structural weakness in demand coming from weak global manufacturing data and Europe’s ongoing struggle to contain Russia’s energy blackmail might reappear again, pushing oil further down into double-digit territory.
President Biden’s $433 billion tax and climate bill, potentially seeing a Senate vote this week already, aims to slap a 16.4 cents-per-barrel tax on imported crude and products, raising fears that this would inadvertently boost inflation as USGC refiners rely on heavy crude’s from Latin America and elsewhere.
The US Treasury and State Department imposed sanctions on a further six companies, based in Hong Kong, Singapore, and the UAE, for allegedly facilitating trade in Iranian oil and petrochemical products, the third round of blacklisting in the last two months.
Haitham al-Ghais, OPEC’s new secretary general, stated Russia’s participation in OPEC+ is vital for the success of the agreement, adding that the group does not control oil prices but fine tunes the market in terms of supply and demand.
With markets still having no idea where the ominous Nord Stream 1 turbines are, Russia has said that there is little it can do to revamp pumping along the pipeline as it continues to supply only 20% of nameplate capacity with only one turbine working.
With the European Union still proposing new initiatives to breach the gap between the US and Iran, with Brussels submitting a new draft text on the JCPOA revival, Tehran said it is ready to set new talks provided they lead to a “sensible and stable” deal.
Australia is considering curbing exports of its LNG after a national watchdog that more natural gas is needed to satisfy the needs of its east coast amidst dramatically declining onshore production, with some restrictions likely even looking into 2023.
Oil Price.com / ABC Flash Point News 2022.