The OPEC wants a higher barrel price

In this article, Alain Freymond, our Group Chairman, and Ahmad Saidali, our Group CEO, share their perspectives on how the target of $90-100 per barrel will now be contingent on the demand.

The target of $90-100 per barrel will now depend on the demand

Since its early April announcement aimed at countering the negative speculative spiral on oil prices, OPEC+ countries have indeed reduced their production. However, the decrease has only been around 0.2 million barrels per day (mb/d), significantly less than expected, and has been offset by the increase in U.S. shale oil production. Today's announcement from Saudi Arabia to further cut its production by 1 mb/d to 9 mb/d in August has been supported by Russia, which will also reduce its supply by 0.5 mb/d.

Saudi Arabia is still seeking to boost an increase in crude oil prices, as the Chinese economic recovery is slow to intensify and Western demand remains weakened by uncertain conditions. However, crude oil reserves are at their lowest level since 2001, approximately 35% below the 2017 level. The decision to delay the replenishment of reduced U.S. strategic reserves in order to cause a decrease in prices and have a positive impact on inflation is still not being questioned. This political decision would allow for a more pronounced decline in inventories and an increase in oil prices.

In the meantime, speculative "short" positions, betting on a forthcoming decline in oil prices, have continued to accumulate in May and June. They have reached their highest level in four years. However, Chinese apparent demand is at its peak, along with record-high crude oil imports. A shift in the supply and demand dynamics appears to be underway. OPEC+ is targeting a range of $90 to $100 per barrel and could likely achieve this goal if global demand remains close to current projections, suggesting a historic surpassing of 100 million barrels per day in 2023. A short-term increase from $70 to $85 per barrel seems probable to us.