Zurich The oil cartel controlled OPEC crude oil markets after the fall in the price of the corona crisis – but now US politicians are attacking the power of oil-exporting countries. The U.S. Congress recently introduced a legislative initiative that could help prosecute state-owned companies for unauthorized pricing in OPEC countries.
So the geopolitical helmet should be on the agenda next Wednesday at the summit of the expanded OPEC-plus alliance to include Saudi Arabia and Russia. However, market observers have not yet expected that US political pressure will affect the decision on production quota.
At the end of March, the 23 energy ministers of the OPEC-Plus coalition decided to bring an additional 2.1 million barrels (about 159 liters per barrel) of oil to market by the end of May and July – equivalent to about two percent of global oil demand. According to analysts, the OPEC-Plus alliance is unlikely to shake this decision next week.
The possibility of an increase in oil supply has also recently reduced prices: North Sea type Brent is currently quoted at about $ 66 a barrel, 28 percent higher than it was at the beginning of the year. In early March, at the height of the latest oil price rally, Brent oil was trading at less than $ 70 a barrel.
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Carsten Fritz, a raw materials analyst at Commerce Bank, says the two opposing factors currently cancel each other out. He says demand concerns have not diminished in view of the rapidly rising corona cases in India, one of the most important oil importers.
The country needs a fall, for example due to the new hard lock, which could lower prices. “However, this is offset by the positive reports on petrol demand in the United States,” Fritch said. According to a Commerce Bank expert, transportation oils are expected to further boost oil demand in the United States – especially as the vaccine’s relatively rapid progress and consumer checks for homes provide additional support to the economy.
Nevertheless, rising tensions between the United States and OPEC in the coming months will disrupt the current calm in the oil market. OPEC Secretary-General Mohamed Barkindo has warned member states that the United States could impose sanctions on government agencies for enforcing no-confidence motions – for example, confiscating the assets of OPEC states in the United States.
If the legislative effort is to succeed, Barcinto said, “the risk of fluctuations in international oil markets increases.” U.S. oil companies have also been affected, Barcinto said. However, there is still a long way to go: the law has so far only been prepared by a committee of the US Congress. It still needs to be passed by both chambers of parliament and signed by US President Joe Biden.
Analysts at Fund House DWS warn of another factor that could destabilize oil markets. Most oil companies outside the OPEC group currently invest very little in the development of new oil wells. “Reluctance to invest in the oil sector will ensure that the initially growing demand for oil will meet the most difficult supply side,” DWS experts said. As a result, oil prices will rise. OPEC says Saudi Arabia, after all, has the largest reserves – thus having the greatest influence on prices. So it is not surprising that the United States is focusing on the power of the oil cartel.
Further: Saudi Arabia’s new power in the oil market will become an issue for Europe.