OPEC + appears to be controlling crude oil prices as U.S. production lags behind pre-pandemic levels, according to a senior executive at the world’s largest independent oil trader, Vitol Group.
The decline in US drilling and production leaves little competition for the group’s efforts to manage markets, said Mike Mueller, Asia’s chief executive at Vitol, during an online conference on Sunday. Crude Brent closed at more than $ 70 a barrel last week for the first time in two years as buyers sought more oil than producers pumped.
U.S. oil producers still use only half of the platforms they used before the coronavirus. Meanwhile, OPEC +, as the group, led by Saudi Arabia and Russia, is known, is releasing the barrels back to the market until demand recovers.
“There is a perception on the market that the control is with OPEC +,”
Last week, the Organization of the Petroleum Exporting Countries and partners agreed to continue easing production restrictions in July, but left markets to guess what it would do for the rest of the year. After reducing production by about 10 million barrels per day or a tenth from daily global demand, the group still has about 6 million barrels per day of empty capacity.
OPEC + spends little on policy, although it sees a tightening of the market
China’s economy will continue to grow, helping to increase oil demand and reduce crude oil inventories, Mueller said. Economic expansion and regulatory changes there are likely to force local refineries to process more harshly, he said. “It’s not worth keeping inventory at all,” Mueller said. “The elimination of stocks must continue from a purely commercial point of view.”
More Iranian crude oil is likely to hit the market this year after the expected deal to curb the country’s nuclear program in exchange for easing US sanctions. Iran is limited in how quickly it can return oil to the market, as many of its stored barrels are condensate, a light and sulfur liquid that can be more difficult to sell, he said.
Given delays in talks last week, Mueller said more Iranian barrels were less likely to hit the market before the fourth quarter.