HomeMediaLatest NewsBiden unsealed oil reserves. How will OPEC+ respond

Biden unsealed oil reserves. How will OPEC+ respond

24 November 2021

Kondratiev Sergey V. Principal Director on Economic Studies, Head of the Economic Department
Gromov Alexey I. Principal Director on Energy Studies, Head of the Energy Department

Sergey Kondratiev, Deputy Head of the Economic Department and Alexey Gromov, Principal Director on Energy Studies of the Institute for Energy and Finance, commented to Gazeta.Ru on the possible consequences of total releasing almost 60 million barrels of crude for oil prices.

Biden's verbal intervention

According to Sergey Kondratiev, a senior expert at the Institute for Energy and Finance, stockists are now testing the waters after Biden's verbal interventions. A clear upward or downward trend in prices will be outlined only in the case of a real release of strategic reserves. The point is that Biden's decision will not be immediate.

“There are no risks of a full-scale trade war between OPEC +, including Russia, and Washington now. Much will depend on how long Biden's declared reserves will be on sale. And this will take at least a few months. If the Americans freed up 50 million barrels within two weeks, then stock quotes would immediately fall to $ 60. In fact, OPEC + now has a stronger position than Washington, so by the end of the year oil prices are unlikely to drop below $ 70, ”the expert said.

Alexey Gromov, Principal Director for Energy at the Institute for Energy and Finance, agreed with him. In fact, both OPEC + and the United States, oddly enough, adhere to the same goal - to reduce oil prices to an acceptable level of $ 75-80. The difference between the parties lies only in the pace: the Americans want to achieve the task faster, while OPEC + has taken a wait and see attitude.

“Biden is much more dependent on the domestic agenda than the world one. He needs to show voters that he can quickly halt record gasoline price increases in the United States and tackle high inflation in the country. His political rating will largely depend on this. His oil interventions are linked precisely to this factor. The market is now very overheated. If the US had not taken any action, the oil price by the end of the year could have reached $ 90 per barrel, if not higher,” the analyst explained.

What will be the reaction of OPEC +

Kondratiev did not rule out a shock scenario involving a decrease in the increase in daily production from 400 thousand to 300 thousand barrels.

“Now this seems like an incredible scenario. The decline in oil production by OPEC + will already become a full-fledged prologue to a price war with Washington. Russia, together with Saudi Arabia, could theoretically take such a drastic step. In such a scenario, prices would return to $ 85 and more per barrel, ”the expert noted.

Gromov expressed the opposite opinion. According to him, a more realistic option for OPEC + reaction would be a decision to increase the previously agreed level of increase in oil production. Now the participating countries are able to raise the current bar up to 600 thousand barrels.

“This option is likely to be discussed at the next OPEC + meeting. Such a reaction from the cartel would be an adequate response from the United States. So far, Biden has received the exact opposite reaction from traders to his statements - the price of oil has jumped again from $ 78 to $ 82. For OPEC +, it is important to maintain a distance until the words of the President of the United States are reflected in practice, and free barrels will actually enter the market. In the meantime, these are all just beautiful words of Biden,” the analyst said.

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