As representatives of the world’s largest oil producers gather in Vienna, one wonders what the mood is like given the latest trends.
Oil prices have unexpectedly risen recently, rising by 20% since the beginning of September, providing essential funds for the limited budgets of the 14 members of the Organization of Petroleum Exporting Countries.
The oil exporting group, as well as some non-members such as Russia, have accepted production cuts to calm the market and support prices. To some extent, this seems to have worked. Brent crude oil, the world’s leading benchmark index, is trading around $64 a barrel, even after a slight decline this week. Some analysts estimate that prices will reach $70 next year.
Although these figures are well below the $100 mark in 2014, they more than doubled at the beginning of last year. This suggests a better future for the courses.
We can also note that the world economy has been larger, which in turn has led to an increase in demand for oil. Indeed, economists had predicted global growth and this had a direct impact on demand, which increased by nearly five million
barrels per day since 2014.
In addition, there are climatic and political factors. Hurricane Harvey, which submerged oil installations on the Gulf coast of the United States in August, caused major disruptions and highlighted the decline in stocks, as well as political events in Saudi Arabia such as the recent corruption scandal among the royal family and other major oil producers such as Venezuela, not to mention exports that fell in Iraq due to tensions in the northern part of the country between Iraqi and Kurdish forces, which also contributed to a general increase in oil prices.
However, American shale companies, in particular, are considered to be the strongest producers on the market, able to increase production to meet growing demand and take advantage of rising prices.
This upward trend in oil prices could also force Saudi Arabia and Russia to simultaneously maintain high production, i.e. Russia could increase its production very considerably in the coming years to take advantage of this increase.