Surprise increase in supply put OPEC’S 60th celebration on Ice
The anew increase in oil supply coupled with a current setback for oil price is the two major headaches facing the Organisation of Petroleum Exporting countries (OPEC) who is turning 60 amid a pandemic that’s jeopardizing its very existence.
Six decades after a handful of oil-rich countries, led by Saudi Arabia formed the 13- member oil cartel, the organisation influence is threatened by the impact of the coronavirus pandemic, infighting within its ranks, the rise of the United States as a major oil exporter thanks to a shale boom, and a global push for renewable sources of energy amid climate change worries.
Oil prices have declined after anticipated higher demand from China failed to materialise. Saudi Arabia has said it would cut prices for Asian and U.S. buyers from October, signalling a change from an upbeat attitude earlier this year.
Analysts are also concerned about weak demand for refined products as the pandemic has many people cooped at home following renewed lockdowns across Europe.
“Very few Asian refiners are buying oil as they still have loads of oil bought when prices were low,” a report by the British information provider, IHS Markit said.
Bloomberg also reported that the United Arab Emirates (UAE), currently OPEC’S third-largest producer also pumped more than its production quota in August due to high electricity demand in the hottest months in the Middle East, which this year was further boosted by more people staying and vacationing at home because of COVID-19-related travel restrictions.
The above development has led to an increase in supply as Energy Information Administration reported a crude oil inventory build of 2 million barrels for the week in early September.
“Analysts had expected the EIA to report a moderate draw of a little over 1 million barrels.
The American Petroleum Institute added gloom to an already pessimistic market by reporting an inventory build of 2.97 million barrels for the same period.
The cartel has already cancelled celebrations originally scheduled to take place this month in Baghdad, where OPEC was originally founded. In addition to its 60th anniversary, this September also marks the 55th year since organization’s secretariat moved to the Austrian capital of Vienna.
The bloc has seen its market share progressively diminish over the years, in part thanks to its efforts to artificially boost oil prices by holding back on its own production. OPEC’S share of the global oil market has fallen to around 30percent from above 50percent in 1973, also hurt by involuntary losses in war-torn Libya, and in Iran and Venezuela, both reeling from US sanctions.