OPEC+ does not have the capacity to push oil prices significantly higher, according to global energy market expert and founder of Vanda Insights, Vandana Hari.
Speaking with CNBC, Hari noted that while the oil-producing cartel has managed to remain cohesive despite market speculation, its ability to influence prices beyond a certain point is limited.
According to Hari, while the cartel has successfully managed to maintain cohesion despite market speculation, it does not have the capacity to push oil prices significantly higher. “I think that is where the market attention is focused because that’s the variable. With OPEC+, we’ve seen three postponements of the unwinding of the 2.2 million barrels per day. What that tells me is that OPEC+ despite all the talks in the market speculation is managing to remain cohesive,” Hari explained.
In 2016, OPEC allied with other top non-OPEC oil-exporting nations to form an even more powerful entity named OPEC+, or “OPEC Plus”. The OPEC+ group has been cutting production to support prices. However, Hari emphasized that while OPEC+ has demonstrated patience in managing these cuts, the cartel’s ability to further elevate prices remains limited.
“The eight members that are cutting these 2.2 million barrels per day are showing that they are willing to be patient,” she added.
OPEC+ Strategy: Stabilizing Prices Around $70 per Barrel
Looking ahead, Hari suggested that OPEC+ is likely to continue pursuing a cautious strategy, with the focus on maintaining a price floor rather than pushing prices higher.
“My own perspective will be that OPEC+ will remain patient. I think they will try and put a floor or maintain a floor around $70 Brent. I think that is the most they can do or the least they can do in their view. They really don’t have the bandwidth to prop prices much higher,” she stated.
US Production Growth Remains Modest
While much of the market’s attention is focused on OPEC+’s actions, Hari also discussed the outlook for US oil production. Despite ongoing speculation about potential changes in US energy policies, especially with the incoming administration of President-elect Trump, Hari pointed out that there is little impact on the decisions made by US producers regarding capital expenditure and drilling.
“There is very little influence that [US President-elect] Trump has on the decisions by the US producers on how much CapEx and where are they going to invest it, how much going into technology really then drilling more wells,” she noted.
Hari noted that the US oil production this year has grown by an estimated 300,000 barrels per day, a sharp decrease compared to the nearly 1 million barrels per day growth seen last year. Hari explained that this slower pace of growth is expected to continue, with predictions for the next year indicating a similar increase in production. “So, next year’s expectations are also around 300,000 barrels per day growth,” she said.
Global Oil Production to Grow Outside the US
Hari also pointed to growth outside of the US, where a number of other countries are expected to increase their oil output. “Of course, it’s very price-sensitive. We have to keep that in mind. So as long as WTA supported well above 65 or around $70 a barrel, that’s what we are going to see,” she stated.
- Beyond the US, oil production is expected to rise in countries like Canada, Brazil, Argentina, and Guyana, as well as in Europe, notably Norway.
- These countries, along with others, will likely contribute to the growing global supply of oil, influencing price dynamics in the coming years.
While OPEC+ continues to exercise some control over oil prices, the group’s ability to significantly influence the market beyond a price floor of $70 per barrel appears limited. The modest growth in US production, combined with increasing supply from other regions, suggests that the global oil market will remain in a delicate balance as it adjusts to shifting dynamics and new supply sources.
