The raw materials market is closely following two key events this week that coincide simultaneously in time. The Organization of Petroleum Exporting Countries (OPEC) and its allies, including Russia, will hold their ministerial meeting next Thursday, November 30, with two new features. One of them is that it will be held in a virtual format instead of convening it in Vienna, as planned, and it will be between weeks, something unusual, given that they usually take place on Sundays. The chosen date becomes relevant if we take into account that that day the United Nations Conference on Climate Change (COP28) starts in Dubai.
Two events in which crude oil production will be at the epicenter of the debate, although for quite different purposes. However, everything indicates that the oil sector’s intention is to take advantage of the climate event to ‘kill two birds with one stone’. According to the ‘BBC’ publication, the United Arab Emirates plans to use its role as host at the summit to close gas and oil agreements in meetings with fifteen foreign governments. Among the meetings proposed, they mention that of China with the Abu Dhabi National Oil Company (ADNOC), the state oil company of the Emirates and the twelfth largest producer of crude oil in the world, in order to put liquefied natural gas opportunities in Canada on the table. . ,Australia or Mozambique.
A spectrum of conversations piloted by Sultan Al Jaber, the executive director of the aforementioned ADNOC and president of COP28, which also contemplates the possibility of negotiating trade agreements with Masdar, the renewable emirates firm with around twenty regions between those that stand out are the United States, the Netherlands or Germany. This list includes Saudi Arabia, a fundamental piece in the ‘black gold’ gear. In the midst of this controversy, investors are following the decision that OPEC’s largest crude oil producer may make about whether to extend an additional cut of one million barrels beyond December of this year, to which Russia joins with another 300,000 barrels per day.
The reason for this postponement appears to lie in Saudi Arabia’s lack of understanding with other members of the alliance and its dissatisfaction with the production levels of Angola and Nigeria, as they are not emulating the additional cuts. With all this, the base scenario that analysts are using for this event is that of an extension of the production cut in an additional attempt to raise the price, although there is always the possibility that it will give some scare to the rest of the countries that do not They share their position, showering the market with ‘black gold’ and thus sinking the price to $60.
The truth is that with the extension of the lower circulation of this raw material it has not achieved its objective, which was to “stabilize” the oil market. The euphoria that pushed crude oil to annual economic highs was little. After the rebound recorded between September and October, the evolution of its price can be compared to that of a soufflé. Expectations of lower demand due to the economic slowdown, excess inventory in the United States and the return to the scene of Venezuela have shaken the price of this raw material from the peak recorded just over a month ago.
Brent, the reference in the Old Continent, is currently moving in the range of 80 dollars, with a correction of almost 17% from the 96.55 dollars reached last September. A trajectory similar to that followed by West Texas, which slows down almost 20% from the 93.6 euros registered at the end of September and fights to retain the 75 dollars, July levels. “We do not see a clear environment for prices to stabilize,” says Joaquín Robles, XTB analyst. The truth is that in both cases uncertainty is weighing on prices in which disagreements and debates over production have heightened investor concern.
“The general consensus suggests that an agreement will be reached between OPEC+ members during their meeting, although expectations vary regarding the magnitude of the measures that could be implemented to maintain stability in the oil market,” says the analyst from IG, Diego Morín. For now, the 23 members that make up OPEC+ face pressure to intervene in the crude oil market under the risk that prices could fall if they do not do so, according to experts from Commerzbank and Pierre Andurand.
In the middle of this marathon against the clock to reach an understanding, OPEC maintains an exchange of reproaches with the International Energy Agency (IEA) after the organization has put it against a rock and a hard place ensuring that the alliance with headquarters in Austria faces the “crucial” choice of continuing to accelerate the climate of crisis or becoming part of the solution. In this regard, it issued a statement this Monday accusing it of vilifying the fossil fuel industry as responsible for climate change.
“OPEC itself is not an organization that tells others what they should do,” said OPEC Secretary General Haitham Al Ghais. Thus, he has argued that the industry is deploying investments with the aim of reducing emissions, among which the capture and use of carbon or green hydrogen, among others, stand out. “We must guarantee that the energy transition allows economic growth and promotes energy access,” he added.
