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Oil Nations Cut 2M Barrels, Prices Hit $95
01. Production Cuts Begin
In accordance with the resolution of the OPEC+ meeting in early October, oil-producing countries will fully enter a state of production cuts starting from November 1st.
Today, we observe that the Brent crude oil price continues to rise, currently standing at $95 per barrel.
From October 10th, over the course of a week and a half, there was a significant drop in the Brent crude oil price, reaching a low of just $88.77 during trading on October 18th.
Starting from October 19th, although there have been some fluctuations in crude oil prices, the overall trend has been continuously upward, indicating that the oil-producing countries' decision to cut production has provided strong support for oil prices.
Even in the coming days, with the imminent possibility of another interest rate hike by the Federal Reserve and a further strengthening of the US dollar, oil prices are still on the rise.
Oil-producing countries use production adjustments to maintain oil prices, while the United States uses continuous interest rate hikes to suppress oil prices; the tug-of-war between the two sides continues.
02. Increased Demand
OPEC has recently released a report that revises upward its forecast for oil demand over the coming decades.
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The report anticipates that the world's demand for oil will reach its peak and stabilize by 2035, with demand continuously increasing until that time.According to OPEC estimates, there will be a significant increase in the global population in the coming years, with 96% coming from developing countries. As the population and economy grow, the demand for oil in the coming years will also be stronger than expected.
From the report, we can also see that OPEC believes that the focus of future crude oil supply will be on emerging markets, not developed countries, because the growth resistance of the population lies in developing countries.
Developed countries are very likely to continue to reduce the demand for traditional personnel in the future.
Recently, the United States has promoted a brand new agreement, with the participating countries being the United Arab Emirates in the Middle East.
Through this agreement, up to $100 billion in investment will be increased to promote energy transformation and develop and deploy more clean energy.
Biden has been focusing on promoting clean energy and has previously promoted the United States to pass relevant legislation to invest more in clean energy in the future.
Because of this, many traditional oil companies dare not increase investment, because they are not sure about the prospects of traditional energy in the future. Traditional oil companies do not increase investment, and they cannot increase supply, which is also the reason why the price of oil in the United States has not been able to drop to the expected price of Biden.
Biden blames energy companies for not being willing to increase production, while energy giants blame the Biden administration for not providing sufficient policy support.
The United Arab Emirates itself is also the third largest oil-producing country among OPEC member countries, followed by Saudi Arabia and Iraq.However, the UAE has also invested a significant amount of capital in the development of clean energy beyond traditional crude oil, indicating that even within oil-producing countries, there seems to be a divergence of interests.
The International Energy Agency believes that to address the issue of global warming, it is necessary to reduce or even cease investments in fossil fuels such as oil, coal, and natural gas.
However, OPEC argues that there is no need to continue viewing oil, a traditional energy source, in a "demonizing" manner.
Due to long-term underinvestment in oil, there may still be a severe crisis in global energy security.
The International Energy Agency optimistically believes that the world is gradually shifting towards green energy. Yet, OPEC believes that crude oil will remain a necessary energy source for several decades to come.
Nevertheless, although OPEC believes that future oil demand will continue to increase, they are unwilling to make any production increase decisions at present and do not rule out the possibility of further reducing output at the December meeting.
The game between the US and oil-producing countries on how to guide the future direction of oil prices is still ongoing.
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