OPEC remains firmly on oil production as oil prices rise
The Organisation of Petroleum Exporting Countries (OPEC), led by Saudi Arabia and Russia, has maintained the supply of crude oil production in a context in which Brent crude, considered the benchmark in European markets, has exceeded 70 dollars for the first time in two years as a result of the global economic recovery. This rise has meant an increase in the price to 70.28 dollars, which implies a rise of 1.3% compared to last Monday's close.
The last meeting of OPEC ministers approved increasing oil supply by more than two million barrels per day by the end of July due to "continued improvement in oil demand as economic recovery continues in most cases as vaccination programmes accelerate". Markets are now waiting to see whether OPEC will decide to further increase its oil extraction from August as oil prices are entrenched at pre-pandemic levels. This reluctance to change levels may be a consequence of increased investment in the "green industry" and the commitment to sustainability that is gradually pushing Western oil production and investment into a corner, although crude oil will continue to set the tone for decades to come.
According to the International Energy Agency (IEA), the recovery in oil demand continues to outpace supply and OPEC would have space to decide whether to continue to open up and supply the rest of the world with its supplies. However, producers are keeping a close eye on Iranian crude barrels that are currently under US sanctions and could return to the market and therefore be an important competitive player if a compromise or resolution is reached in the negotiations currently underway to rescue the agreement on Tehran's nuclear programme signed in 2015.
If the pact's commitments are restored, economic analysts believe that Iran could increase its oil supply by between 0.5 and 0.15 mbd. However, the Persian oil minister estimates that "Iran's potential is even higher".
In this line, Saudi Arabia's energy minister, Prince Abdul Aziz bin Salman, expressed that "there were clear signs of improvement" in the recovery of the world economy, an improvement that is being reflected due to the increase in demand from countries such as the United States and China. However, according to Salman, "there are still some clouds on the horizon" and he has urged OPEC to continue monitoring the situation on a monthly baseline.
In the same way, the Saudi prince added that "Saudi Arabia is no longer just an oil-producing country, but an energy-producing country, and a very competitive one", in reference to the low costs that the country sustains in the production of oil and gas, as well as the fall it has experienced in the costs of renewable energies such as solar energy, as well as hydrogen. In this sense, Salman was confident after affirming that "we are going to be the winners in all these activities". Referring to the increase in shale oil production by the United States, Salman said that he was not "concerned" about this competitive market.
On the other hand, oil production is expected to increase in countries such as Canada, Brazil, and the United States beyond 2021, while expectations are that oil production will decrease in Latin countries such as Colombia and Argentina due to the epidemiological situation in those areas.