BAKU, Azerbaijan, April 10. OPEC+ output cut may trigger shale oil production growth, Cyril Widdershoven, a Middle East geopolitical specialist and energy analyst, a partner at Dutch risk consultancy VEROCY, and Global Head Strategy Risk at Berry Commodities told Trend.
He was commenting on the decision of some OPEC+ countries to curb the production by 1.5 million barrels per day.
“At present it looks as if this will be reached. Not only are still several countries facing lower production than the quotes have been stating, but major OPEC+ members, especially Saudi, Russia and UAE are taking the major brunt of all, they have committed to it. With regards to Russia, it becomes rather easier, when looking at impact of sanctions (EU-West) on Moscow, lack of competitive edge right now, and potential stagnation in Asia,” noted Cyril Widdershoven.
He went on to add that the official statement is “it is the economy, stupid”, as demand is not increasing at present in Asia as expected, while OECD is looking at financial crisis, banking crisis and high inflation/interest rates.
“Unofficially, OPEC wants to regain its market position, as a market maker, while at the same time it is a reaction to the lack of support of Washington and others to bring more oil to market. For OPEC leaders it is also a simple economic equation, they need the money to fund their major economic diversification projects, and also to keep their pockets filled. It was expected that prices would start to spike, but this has not happened in reality, only a slight increase of 4-5$ per barrel, which is still far from the $100 per barrel that people talk about. What could even happen is that if no real reaction is seen, prices could even go into a bearish market again, bringing prices down even again,” the expert said.
As for the US reaction, Widdershoven believes that Washington can’t do anything at present, as OPEC+ holds the market, not Washington.
“The only action maybe would be an increase in shale oil production, but the signs there are not yet on green at all,” he explained.