OPEC+ output cut, decline in US oil reserves boosted oil prices: experts
KUWAIT CITY, Oct 10, (KUNA): Kuwaiti oil experts attributed the 10 percent increase in oil prices last week as a result of OPEC+ decision to lower production by two million barrels per day, starting next November, the biggest decrease in production since 2020.
In separate statements to Kuwait News Agency (KUNA), economists added that such an increase is also supported by the “big and sudden decrease” in American crude commercial oil reserves and the decline of strategic reserves, as it reached its lowest levels since July 1984.
Petroleum engineering assistant professor in The Public Authority for Applied Education and Training, Dr. Ahmad Al-Kouh, stated that many factors contributed to the price hike most notably the Russia-Ukraine crisis and the renewed demand since the waning of the coronavirus pandemic.
Al-Kouh added that there are expectations of an upcoming global economic recession, indicating that inflation in the global economy is affecting the oil industry and consumption.
Furthermore, he commented saying oil price of USD 70 is fair for all including producers, consumers, and investors.
There are two types of consumers, Al-Kouh explained, the first consume oil for purpose of heating, while the second use it for industry and transport.
Deputy Chief of Kuwait Business Council in Dubai, Feras Al-Salem, also attributed the rise in oil prices to OPEC+ decision to lower production, which comes as an attempt to safeguard market balance and avoid surplus.
Al-Salem mentioned that advancements in the cargo sector in East Asia increased the demand for oil as fuel for tankers.
He forecasted that oil prices will exceed USD 100 due to a standstill in supply, especially as European Union has not yet reached an agreement to compensate for Russian oil and gas.
Al-Salem stated that gas prices increased 80 percent since the beginning of the year, compared to the 11 percent increase in oil prices.
He states, “Gulf exports to Asia will not be affected but rather get worst due to the expected sanctions on Russia”, this will create an international crisis in energy prices, while inflation levels will reach new records.
In a similar statement, energy expert Jamal Al-Gharabally said to KUNA that (Opec +) alliance proved its firm and strong position after the decision to reduce production starting next November amid expectation of lower demand for oil because of the global economic recession.
Al-Gharabally explained the political and economic sides of the OPEC + decision to reduce production, especially after the late visit of US President Joe Biden to Saudi Arabia, during which he demanded to increase oil production.
The expected is that oil prices will achieve some gains during the last quarter of this year and beginning next year, reaching USD 110 pb, in case the war between Russia and Ukraine continues, and the resulting economic, political, and trade decisions and sanctions.
On Wednesday, OPEC plus alliance agreed to reduce oil production to two million barrels per day, to support prices that witnessed lately its first quarterly loss in two years.