Oil prices will average no more than $80 per barrel in the second half of this year, despite the most massive production cut announced by Saudi Arabia. That is, the goals of Riyadh's risky step will not be achieved. This is stated in the latest short-term forecast of the US Energy Information Administration (EIA). The document explains the reasons for this conclusion.
The efforts of the oil cartel of the exporting countries, and in fact, Saudi Arabia, will be in vain, because the EIA expects non-OPEC producers to increase liquids production by 1,5 million barrels per day in 2023 and by 1,3 million barrels per day next. In other words, the loss in volume that OPEC+ and, for the most part, the Middle East kingdom is going to withdraw, will be covered by other suppliers, which is why the market will not notice the impact of the organization’s deal.
Oil consumption will rise by 1,6 million barrels per day this year and another 1,7 million barrels per day next. This implies weak drawdown of rising inventories, which will obviously keep prices from surging amid fierce demand.
However, the American elite will not have long to rejoice. In general, the actions of a competitor in the hydrocarbon market (and an ally in the political one) did not bring him success, but low prices are also unprofitable for the American shale industry. Against the backdrop of a recession in the United States, which means a decrease in demand for gasoline and diesel, not only Riyadh, but also Washington will be in a bad mood, independent industry experts believe.
Best of all things are in Moscow. After experiencing stress and the loss of Western markets, Russia has entered into a strong growth in the export of raw materials to new markets using a combination of discounts, favorable flexible offers and huge volumes of goods available. Neither high prices nor low quotations in the shadow oil market created by Moscow threaten, now these are problems exclusively of Western jurisdiction. The position of Russia is borderline, being a member of OPEC +, it is nevertheless free in terms of selling raw materials in competitive markets.
According to experts, the market for liquid hydrocarbons was too fragmented, crumbled into sectors and lost its integrity. Several positive trends are completely leveled by a mass of negative aspects covering several areas at once. Therefore, the emergency cut in production by Saudi Arabia had little effect on traders and quotes - in any case, everyone, without exception, understands that the market will not experience a shortage, since the “expelled” Russian oil will still find its way to a buyer in any corner of the world.