Little additional funding: prices rise after OPEC decision

Status: 05.10.2021 14:39

Despite the rapid rise in oil prices, the most important producing countries only want to produce little oil in the future. This decision is already causing them to keep rising prices. Because there is no end in sight to the high demand.

By Mark Ehren, tagesschau.de

The oil export cartel OPEC + has made the markets even more uneasy with its decision on further production volumes. The group, which in addition to OPEC members such as Saudi Arabia and the United Arab Emirates (UAE) also includes other important producing countries such as Russia, only confirmed the earlier decision yesterday to increase production by 400,000 barrels per day in November.

The renouncement of a significantly higher crude oil production drove the price for the North Sea variety Brent by more than three percent to 82 dollars. That was the highest level in three years.

Not at a loss for excuses

“We are afraid of the fourth corona wave, nobody wants to take big steps,” emphasized an industry insider quoted by the Reuters news agency. “We will observe the situation, as we know that demand usually falls in the fourth quarter,” said Russian Deputy Prime Minister Alexander Nowak, explaining the decision of OPEC +.

Significant increase in demand expected

There are currently no indications of falling demand. According to the latest report from the EIA (Energy Information Administration), the US Department of Energy’s energy statistics office, global demand is expected to increase from 98.6 to 99.8 million barrels per day from the third to the fourth quarter. Worldwide demand is expected to rise by another 2.4 million barrels per day by the end of next year. This contrasts with the previously decided increase in the production volume by 0.4 million barrels per day. The wish of many market participants for a major increase in production was thus not fulfilled.

“The oil market could have absorbed such excess quantities without any problems, without the oil prices having slipped significantly as a result,” said the oil technology company Tecson in a market commentary. “This will probably pave the way for oil prices of up to $ 100 a barrel.” Such a drastic forecast had already been made in early summer.

Gas prices drive oil prices

To justify this, the experts also refer to the sharp rise in prices for natural gas. “They are now six times as expensive as the long-term average. Those who can replace the energy source with oil. This means that part of the gas shortage is transferred to the oil market, where it causes prices to rise.”

It is questionable whether the new Nord Stream 2 gas pipeline can quickly remedy the shortage. The German energy company Uniper, as one of the most important financiers of the billion-dollar project, does not expect the Federal Network Agency to grant the controversial gas pipeline a quick operating license. “The certification of the pipeline, according to all that I know, will definitely be so late that this pipeline will no longer help us this winter,” Uniper boss Klaus-Dieter Maubach said last week.

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