OPEC+’s decision to implement small production cuts is a political statement and symbolic message sent by the alliance, analysts said.
On Monday, the team announced small oil production cuts 100,000 barrels per day to raise prices. Only last monthOPEC+ decided to raise oil production to the same target of 100,000 bpd.
Ellen Wald, president of Transversal Consulting, said: “It’s basically like zero for the market. “Increase [in oil production] Last month was also almost nothing…and now we’re talking about getting rid of those. “
Wald said the underlying message makes more sense than the cuts themselves.
“The symbolic significance of this cut is, in my opinion, much more important to the market,” Wald said, adding that the price of Brent Crude Oil was “push up a lot” after the decision.
Oil prices rose about 3% on Monday following the OPEC announcement. The rally has since lost some ground, cutting through Tuesday’s gains. Brent crude oil stands around 95 USD/barrel while West Texas Intermediate fluctuating around $88/barrel.
“It’s more political for the President [Joe] Biden, like the European Union, signaled that OPEC was going to go its own way and that they wanted to protect those higher prices,” said Andy Lipow of Lipow Oil Associates, who also mentioned that the cuts were “quite” bland “.
“[They’re] basically – look, we were talking about cutting. A full cut is within our power and we could very well make a much more meaningful cut than this,” Wald said, adding that Russia’s influence is quite significant. in OPEC+.
Price cap could end up ‘push up oil prices’
Both analysts cast doubt on the effectiveness of Russia’s oil price cap.
Last week, the G-7 countries agreed Russian oil price limit to reduce funds flowing into Moscow’s war depot and reduce the cost of oil for consumers.
“[It] looks like India is really about to sign in here. And so is China,” said Wald. She explained that even if some countries agree not to buy oil from Russia, other countries like India and China can still buy these barrels at a discount. .
“I don’t see how this is going to happen except to push up the price of oil for everyone, except those who are continuing to buy Russian oil,” she said.
Similarly, Lipow said the price cap is sacrosanct because both China and India “have benefited from the deep reduction in the price of Russian oil” and have nothing to gain by raising prices.
Lipow added that the price cap protects consumers from paying higher prices rather than reducing demand for oil.
“They have no incentive to reduce demand… That means governments across Europe will be printing money to send to consumers and getting deeper and deeper into debt.”
