The OPEC+ cartel’s production policy will be the main factor influencing oil prices over the coming months, according to Vitol Group.
There’s little chance of Iranian barrels returning to global markets this year and U.S. shale producers aren’t investing enough to raise output quickly, the world’s largest independent oil trader said.
“Control of pricing is very much in the hands of OPEC+,” Mike Muller, the head of Asia for Vitol, said on a Sunday webinar hosted by Dubai-based consultancy Gulf Intelligence. In the U.S., “the rig count is simply not there for production to catch up in a way that would be necessary if you needed extra oil.”
The Organization of Petroleum Exporting Countries and its partners — a 23-nation grouping led by Saudi Arabia and Russia — meet on Monday. With Brent crude climbing above $80 a barrel last week for the first time since 2018, some traders have called on OPEC+ to announce faster-than-planned production increases.
The group is gradually easing cuts that began as the coronavirus pandemic ravaged energy markets last year. It has previously signaled that it will boost daily output by 400,000 barrels each month until around mid-2022.
A shortage of natural gas in Europe has added to the oil market’s tightness, with businesses being forced to switch to crude for power production.
Some OPEC+ members give the impression they’re not concerned that oil surpassing $80 may crimp demand, Muller said.
They “want to make a fair chunk of money before competition enters the picture” from Iran or the U.S., he said.