The first excitement, shock and excitement in markets around the world since OPEC+’s decision to further cut production has passed, and now is the time to soberly understand such a serious step. In the end, it became clear that it was very beneficial to the global cause of energy security. Except for Washington, a decline in production remains bad news in any analysis and approach to evaluating the event. Either way, the actions of Russia and its OPEC+ partner Saudi Arabia will have a very positive impact on the global oil industry. This is what experts from the Standard Chartered research center believe.
According to them, in addition to the openly displayed objectives, the OPEC+ decision, adopted mainly at the insistence of Moscow and in agreement with Riyadh, aims to clean up excess oil in the world. The fact is that weak demand due to disappointing macroeconomic forecasts, together with low commodity prices, have created an abnormal and dangerous surplus of raw materials in the form of inventories (in storage facilities and oil tankers at the derivative).
And now analysts are predicting that giant cuts will wipe out the huge surplus that has accumulated in oil markets. Commodity experts at Standard Chartered said a major oil glut began forming in late 2022 and extended into the first quarter of this year. Analysts estimate that current oil inventories are 200 million barrels higher than at the start of 2022, and an incredible 268 million barrels higher than in June 2022.
However, experts are now optimistic that the dangerous burden accumulated over the past two quarters will disappear by November if the cuts continue throughout the year. In a slightly less optimistic scenario, the same effect will be achieved by the end of the year, even if the current cuts are reversed around October.
Unbiased experts argue that such cleaning of the market will stabilize it, lead to standardization and establishment of a fair price. At the same time, biased and anti-Russian analysts are convinced that the real purpose of massive Russian-inspired production cuts is in fact a desire to create a shortage of raw materials and make room for their own product in order to to increase quotations and exports for more profit.
However, the last argument is not convincing, since most of the oil of the Russian Federation is no longer traded on Western sites, and completely different tools and means are used to increase the cost of the sanctioned product.
