Major oil producers, who are set to reconvene on Friday to discuss their production policy for August onward, may prefer a cautious increase considering global oil inventories and demand trajectory, according to experts.
The Saudi-led OPEC bloc of 13 countries and the Russian-led non-OPEC group of 10 participants postponed their Thursday meeting for one day as the meeting came amid demand uncertainties caused by the spread of the new variants of coronavirus and related restrictions imposed in several countries.
Pedro Azevedo, Angola's petroleum minister and president of the OPEC conference said in his keynote speech during the 181st meeting of the OPEC conference on Thursday that "the global economy has shifted from reverse to forward gear" and expressed optimism over worldwide oil demand.
Azevedo also cautioned that coronavirus continues to take a painful toll and said it is "a grim reminder of the uncertainties that still loom over us."
However, the meeting was held at a time when both benchmarks broke new records with Brent hitting $76.71, marking the highest price since October 2018 and WTI reaching $76.22 a barrel, the highest since September 2018.
Speaking to Anadolu Agency, Randall Mohammed, former vice president of energy for Ahart Solutions International said the risks around a demand recovery and keeping supplies at a level to optimize prices will play a big part in the decision that OPEC+ will take.
"No doubt that oil prices are in a healthy position in the mid $70s and could go to $80 per barrel if OPEC+ decides to extend the production cuts," Mohammed said.
He added that a supply glut is not what oil producers want, given the loss of income from extremely weak prices in 2020, and warned that these countries have budgets to balance and require oil prices above $70.
Mohammed predicted that OPEC+ might initially increase production by 500,000 barrels per day (bpd) while keeping a careful watch on the demand and inventory buildup.
-Is OPEC willing to sacrifice market share for higher prices?
According to Mohammed, higher oil prices entail higher fuel prices that will be passed onto consumers.
"When I look around, the price of regular gasoline is $3 per gallon compared with $1.75 last year. So, I do not think we will see that pressure coming from the US President Joe Biden, which puts OPEC+ in a better position to constrain supply," he said.
Acknowledging that OPEC+ countries prefer higher oil prices over market share, Mohammed said US shale oil is not yet showing robust recovery, with a fall of 2 million bpd despite the recent uptick in rig counts.
By Sibel Morrow