The market believes that if the broader market remains in risk-on mode before U.S. economic data rings the bell of recession, oil prices may continue to maintain a slow upward trend amid a weaker dollar.
On Friday, March 31, a monthly survey conducted by the media showed that compared with February, OPEC’s crude oil production decreased by 70,000 barrels per day in March due to the impact of production cuts in Iraq and Angola.
The survey showed that output from all 13 OPEC members was 28.9 million barrels per day in March. OPEC members subject to quotas fulfilled 173% of their production reduction commitments in March (169% in February); OPEC members subject to quotas produced 930,000 barrels per day less than the target in March (the figure in February was 88 million barrels/day).
The biggest driver of OPEC’s decline in crude oil production is the decline in production in Angola and Iraq, two of the organization’s members.
Angola’s crude oil production is lagging severely, with output falling further in March due to maintenance work on the country’s Dalia oil field.
For its part, Iraq stopped exporting crude oil from the northern Kurdish region to Turkish seaports via a pipeline on March 25. In recent days, several foreign oil companies operating in the Kurdish region have announced that they will halt production as storage capacity reaches its limit and exports remain at a standstill.
The Kurdish region transports approximately 400,000 barrels of crude oil per day to Turkey’s Ceyhan port through the pipeline, and then transports it to the international market via tankers. However, after related disputes between Iraq and Turkey, the Iraqi government stopped exporting crude oil to Turkey.
Analysts believe that if the global economic outlook improves, oil prices may continue to climb. Stephen Innes, managing partner of SPI Asset Management, believes:
If broader markets remain in risk-on mode ahead of U.S. economic data ringing recessionary bells, oil prices are likely to maintain their slow upward momentum amid a weaker dollar.
Despite small production cuts in Angola and Iraq, Price FuturesGroup senior market analyst Phil Flynn believes that as refiners are about to end the maintenance season, coupled with global demand for fossil fuels, they are soaring. He believes these factors will contribute to what he calls “a new peak season for oil supply and demand in the coming weeks.”
UBS commented on Thursday:
While we believe oil prices are likely to remain volatile in the short term, we still expect rising crude oil imports from Asia to push prices higher in the coming quarters.
Other analysts believe that if recession can be avoided, oil prices will fluctuate around US$75 to US$85 per barrel in the next few months.
The market is also awaiting the OPEC+ Joint Ministerial Monitoring Committee meeting next Monday. The meeting is expected to discuss the importance of continuing to monitor markets, which are currently reeling from worries about the U.S. and European banking crises and potential recession. Consulting firm Tyche Capital Advisors believes that Monday’s meeting is “worthy of attention”, but OPEC+ may recommend sticking to the current production reduction agreement.
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