We had already seen it with the conflict in Ukraine (which Zelensky would like to finish by March) and we confirm it with that between Israel and Hamas: war causes a domino effect that affects all areas of daily life in all countries of the world. Including the energy sectorin particular that of fossil fuels.
Above all, the country has been feeling the effects of the crisis in the Middle East in recent weeks petroliumseen during the day down more than 4%. OPEC+, the Organization of the Petroleum Exporting Countries, postponed the important Vienna summit to November 30th scheduled for the 26th, due to international tensions. With all the consequences of the case.
The trend of oil prices and the decision of OPEC+
Certainly the oil sector is no stranger to upheavals in production and prices due to conflicts and disputes between states, especially in the Middle and Near East. While some revisit the ghosts of the 1973 embargo, Saudi Arabia shakes the system because of unwanted and prolonged loss of market share and the ineffectiveness of production cuts. The surprise announcement of the postponement of the OPEC+ meeting then caused crude oil prices to collapse: the Brentthe international reference, has lost more than 3 dollars a barrel, and has come to trade around 80 dollarsa sharp decline compared to almost 98 dollars a barrel at the end of September.
The rescheduling of the Vienna summit by OPEC+ also pushed the WTI below $74, again around four-month lows. At the same time, however, the hypothesis of deeper cuts in global production seems to be definitively receding.
Global oil producers were due to meet on November 26 to discuss the changes to the agreement for joint production reduction, in response to the changed international economic context. Another destabilizing factor was also the strong e unexpected increase in production recorded in the United States. The Energy Information Administration (EIA) also reported a deep decline in gasoline and distillate inventories.
Meanwhile, for other reasons, Europe’s engine stops: Germany is in deep crisis.
From Arabia to Russia, what’s happening at OPEC
We were talking about the malaise of Saudi Arabia, the main producer of OPEC+ and that until the end of 2023 it will continue to reduce production by one million barrels per day. All due to the cuts program inaugurated by OPEC+ at the end of 2022, by virtue of which also the other member states, such as Russia, have committed to reducing collective oil production by approximately 5 million barrels per day. We are talking about a quantity equal to 5% of daily demand worldwide.
In detail, the Saudis saw their output drop by just 9 million barrels per day, compared to a capacity of over 12 mbd (million barrels per day). The USA instead they managed to extract over 13 mbd and export over 4 mbd (+20% on 2022), hitting two historical records. Even the Russiain defiance of Western sanctions and OPEC constraints, overtook Saudi Arabia in production, with 9.45 mbd in October.
However, Riyadh is not willing to shoulder the largest share of the cuts yet and lashes out against the behavior of other producing countries, aiming to redistribute the burden of crude oil cuts differently among OPEC+ member states. However, the reorganization of production quotas started in June was contested by some African countries. Tensions generate tensions, in short, paralyzing the action of the Organization and the global market.