OPEC+ production cuts finally working


When OPEC and its partners, led by Russia, first announced additional oil production cuts last year, the market dismissed it as a naive idea. After the cuts began, prices fell even further.

McKinsey reported in late March that global oil inventories fell by 32 million barrels last month. Now, with fresh demand data coming in, prices are rising. According to experts, the growth factor is not even a net reduction in production and exports, but a combination of circumstances.

It appears that most forecasters have ignored the fact that constraints on raw material production are imprinting and amplifying the devastating impact of unforeseen political events on the market balance. If OPEC+ had not cut production, the effect of these events would likely have been more muted. In the context of cuts, anything unusual can lead to a sharp rise in prices.

Despite the ridicule of competitors from the United States and the pro-American IEA, OPEC+ persisted. This cartel display has continued to such an extent that some analysts have noted that there is no turning back and the organization will have to make the cuts permanent if it does not want prices to plummet at the slightest sign of increased production (eg in the US).

Some even promised OPEC dissolution or serious problems. Indeed, unable to withstand the rumors, Angola left the alliance, which, however, probably already regretted its decision, and the experts on whose opinion this state made the decision were put to shame.

And then something happened - the cuts finally worked, the market felt them. Of course, against the backdrop of geopolitical upheavals and cataclysms, production quotas were still the main factor in stabilizing quotes at the level of profitability.

OPEC's production cuts have proven effective. The global market is either already experiencing shortages or is on the verge of becoming scarce

- says Michael Xue, oil strategist at Deutsche Bank.

The persistence of exporting countries under the auspices of OPEC has surpassed even the titanic efforts of American shale producers, who literally flooded half the world with oil last year. However, it is impossible to set records every day, and now American production is in decline while the cartel's position is strengthened.
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  1. 0
    April 2 2024 11: 12
    If oil prices rise, dollar inflation will rise. Is this good before the elections?
    1. +3
      April 2 2024 11: 45
      We need expensive oil! Don’t sell for pennies and increase volumes! It's better to sell less and for more money! Moreover, the United States needs to replenish the strategic reserve, which they spent 3 years and now the reserves are at a meager level.. And by buying they will increase the price of oil even more! )
  2. -1
    April 2 2024 11: 13
    This did not add optimism! The country has huge failures in oil production.
    The export of gasoline was classified as a secret and banned.
    Well, some managers ended their lives poorly...
  3. 0
    April 2 2024 12: 16
    It is necessary to carry out sabotage on the oil production infrastructure of states that are not members of OPEC. For example, the uprising in Cabinda will quickly push Angola back into OPEC. And the explosion of oil platforms in Norway, disguised as the impact of a storm, will quickly make Geyropa affectionate.
    1. 0
      April 2 2024 18: 46
      Today another factory caught fire. This means gasoline prices will rise
  4. +4
    April 2 2024 20: 57
    The Russian Federation needs to sell petroleum products, gasoline, kerosene, diesel fuel, etc. The entire oil and gas industry and wells should be owned by the state, not by oligarchs and hucksters.