Will OPEC+ Remain in Control of Oil Markets?

After a volatile session, Oil (CL) rose for the third day in a row, after a single lower session on Tuesday that interrupted a preceding four-day rally. Oil trading was up and down today ahead of a meeting by OPEC+.

The Organization of Petroleum Exporting Countries is known as OPEC, and the organisation’s partners are expressed by the “plus” in OPEC+. The group is made up of 23 nations, which are led by Saudi Arabia and Russia. The meeting was held today, October 4th, at 11:00 British Summer Time.

Analysts estimate that OPEC+ is the key factor influencing Oil prices in the current market. This estimation follows the oft-recurring question of whether - or emphatic statement that - the organisation has lost its grip on the price of the black gold. The last time this assertion was made was in 2020, due to competing Oil production in the U.S., as well as the rise of alternative energy sources.  

However, American shale producers have lost their influence over the market for now, having reduced output-directed investments. This means they will not be able to raise production quickly, leaving the cartel in charge of pricing. 

Will Iran Begin Exporting Oil?

Another potential headwind to the price of Oil comes from Iran, whose reintroduced exports into the market would increase supply and therefore likely weigh on the price. Iran’s Oil Minister Javad Owji said on Wednesday that Iran intends to boost its Oil sales abroad, sanctions or no sanctions by the United States. The Oil Minister accused the U.S of using Oil sanctions as a “political tool” to harm the country’s market, since Oil exports are Iran’s primary source of revenue.

However, Iran’s re-entry into the Oil market seems unlikely after a lethal drone attack against a tanker in the Gulf of Oman, on July 29th. America, Britain, and Israel accuse Iran of having perpetrated the attack, making a quick resolution of nuclear talks less likely in the near future. Moreover, as of September 28th, the United States is asking China to reduce its oil imports from Iran, according to American and European officials. 

OPEC+ gathered today to discuss its output level for the month of November, after implementing an emergency policy to compensate for the lack of demand during social restrictions amid the pandemic. 

Bulls and bears had a tug of war ahead of the meeting, with the price flipping between gains and losses. After all the volatility Oil’s price was little changed, staying flat at Friday’s closing price below $76 a barrel. Friday’s settlement was at the highest price since July 5th, itself the highest price since October 3rd, 2018.

What Might Be OPEC+’s Price Objectives?

This indecision on the price, which is causing fluctuations, might be the product of a market debate about OPEC+’s policy. Some doubt that OPEC and its partners will increase their planned output of 400,000 barrels a day for November. 

Others differed in opinion, holding that OPEC+’s may increase supply more than had been planned due to demand growing more than expected and driving prices up.

This opinion may be supported by a statement made by the Iraqi Oil Minister. Ihsan Abdul Jabbar Ismail reportedly said on September 22nd that OPEC “hopes to maintain Oil’s price at more than $65 per barrel.” When the Oil Minister made this announcement the price of Oil was about $70. The price right now is below $76. Therefore, if the Iraqi Oil Minister is correct, OPEC might increase output to push prices lower, toward its $65+ objective.

What will OPEC+ decide, and how will it impact market prices? Stay tuned.