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WorldAsia"OPEC" .. a safety valve for the stability of oil markets

“OPEC” .. a safety valve for the stability of oil markets

OPEC has always been concerned with a permanent and constructive dialogue between itself and all international partners and agencies to guarantee the interest of all parties, as well as to ensure the continuation of world economic growth, which depends mainly on the energy, the main dynamic of production.

And while the organization is seen as the cornerstone of this path, all eyes are on Vienna, where the meeting of members of the Organization of the Petroleum Exporting Countries (OPEC) and its allies will be held, led by Russia, in what is known as (OPEC+) on June 4, which is the meeting that can result in sudden market decisions in the scenarios offered.

OPEC+ makes its decisions based on an accurate reading of the market, supply and demand rates and relevant economic indicators, in light of the uncertainty currently dominating the global economic scene, and we expects it to make decisions to keep the market balanced amid the current swings, so as to maintain appropriate price levels.

And Saudi Energy Minister Prince Abdulaziz bin Salman had warned oil speculators, days before the next meeting to decide on future oil policy, and he mentioned during a speech at the Economic Forum of Qatar, that speculators, as is the case in any market, will remain, “I keep telling them they’re going to suffer. They suffered in April, I don’t have to show my cards, but I’ll just tell them to be careful.

These statements heightened the market’s state of anticipation, expecting further decisions that would shape oil policy for the foreseeable future in light of the ongoing economic transformations and the many challenges ahead in the economic arena.

Happy reading ahead

Financial expert and economic analyst, Waddah Al-Taha, says in statements exclusive to “Economy Sky News Arabia”:

Previous OPEC+ decisions were fair and excellent. The decisions made by the alliance did extrapolate to what was happening in the market. Decisions were made based on this correct reading of the future, allowing the alliance to maintain appropriate levels, especially in the year 2022. Before that, and during the Corona period, the decisions and orientations of the ‘OPEC+ were effective and influential.

Regarding the upcoming OPEC+ meeting and the new decisions it might bring that will affect the oil market, Taha says, “I don’t think there will be a binding decision to cut production, and if decisions to reduction occur, it will be voluntary.”

He justifies this by saying that some producing countries cannot reduce further at present, especially since Russia – which is one of the largest producers – cannot, under the current circumstances, reduce its production. more than that, knowing that in the year 2022 Russian oil revenues were It increased, despite the drop in production, while this increase was due to the increase in prices which compensated for the drop in production.

The financial expert and economic analyst underlines, in the same context, the reports published by a number of expert houses, banks and international institutions, which indicate that oil prices in the third quarter of this year will experience a recovery to average above $85 a barrel, and some banks have price estimates above $90.

These estimates give rise to optimism, according to Al-Taha, who claims in his interview with “Sky News Arabia Economy” that this price range is between $85 and $88 on average, as indicated by estimates from ten financial institutions. the most important. , very appropriate for producing countries and considering general budgets for this year.

He adds, “However, OPEC+’s ability to centralize monetary policy is based on purely economic study away from politics, and it has been able to play that positive role in oil markets generally.”

expected oil prices

Estimates from global financial institutions vary regarding expected oil prices in the third quarter of this year 2023, the maximum of which was at JPMorgan Chase ($96 per barrel), then UBS Global and Société Générale ($95) and HSBC ($92). ), Goldman Sachs ($89), then Standard Chartered ($88), Citigroup pegged the expected price at ($83 per barrel) and Morgan Stanley at $77.9 per barrel.

Algerian economist, El Hawari Tigrsi, said in exclusive statements to “Sky News Arabia Economy” that markets await very important decisions from OPEC+ and in light of the concerted efforts and agreement within the coalition, in a way that can respond to any resistance or pressure from outside the contributing OPEC+ countries Decisions to achieve global market balance in accordance with its assigned role.

He indicates that there are countries that want to put pressure on the coalition countries through political practices in some cases in order to push to increase production and reduce prices accordingly, which causes a crisis in the programs and policies of oil-producing countries. countries (..) but the organization enjoys solidity and clarity, objectives that give more freedom to its members, and based on a real and serious strategic vision.

And he stresses that the decisions expected at the next meeting will be used to help control the global market, especially after the recent drop in oil prices in connection with a number of economic developments and indicators (. .), adding: “The markets are waiting for a decision, just like the previous decisions aimed at controlling the markets. This may include approving a reduction in production in the next stages, in a way that gives more mobility to the market and that affects prices and serves the economies of the producing countries whose programs and strategies are linked to oil prices.

Last April, several oil-exporting countries within the “OPEC +” coalition, including Saudi Arabia and the United Arab Emirates, announced a voluntary reduction in oil production, from May until the end of 2023, in an approach aimed at “achieving the balance of oil production”. market.” Last October, OPEC+ also decided to cut production by around two million barrels per day.

Main role

For his part, the Saudi economist, Salem Bajaja, underlines in exclusive statements to “Economy Sky News Arabia” the leading role played by the Organization of the Petroleum Exporting Countries in stabilizing the market, stating:

OPEC countries have played a leading role in stabilizing the oil market. OPEC countries have proven that they remain a safety valve and a reliable source of oil supply. Saudi Arabia intervened with the support of the OPEC+ coalition to stabilize global oil prices. During the Russia-Ukraine crisis, the world relied on the efforts of the OPEC+ coalition to stabilize oil prices.

According to this main leadership role, the economist refers to the upcoming meeting in Vienna, saying: “The next OPEC meeting is expected to keep prices reasonable for consumers and producers (in order to ‘reach equilibrium in the oil markets).

safety valve

In addition, the economist, university professor, Professor Murad Kouachi, points out in statements exclusive to the site “Sky News Arabia Economy”, that the OPEC + alliance has become in the process of playing the role of a valve of security to maintain the level of prices, although this role has not been appreciated by certain economic powers in the world, led by the United States of America, which rejects the decisions of the coalition to reduce production ( …).

He explains that the OPEC+ alliance plays a major role in maintaining price levels. Citing recent decisions to reduce production, as influential historical decisions in this context.

He also explains at the same time that the next meeting of the alliance is a meeting of great importance in the light of the current conditions of the world economy, in particular with the recent drop in oil prices.

And to continue: “Thus the speakers will try to find solutions to this problem, in particular in view of the decline in activity in China (..)”, indicating that many things are linked to the extent of the recovery of the Chinese economy after the recent opening, while Chinese demand is expected to increase at a later date.Experts are studying the current situation.

The Economist identifies three fundamental factors that loom large in light of the geopolitical conditions the world is going through (lower oil prices, Chinese demand and Russia’s commitment to what it promised previously to reduce its production).

As a result, Kouachi expects “there will be further steps at the next meeting, but they may not come as a surprise given recent statements by the Saudi oil minister in which he warned speculators …and so all indications suggest there will be some reduction, however small, to keep prices at the $80/barrel level.

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Arab Desk
Arab Desk
The Eastern Herald’s Arab Desk validates the stories published under this byline. That includes editorials, news stories, letters to the editor, and multimedia features on easternherald.com.

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