-
OPEC+ cannot cut oil production enough to push prices higher than they are now.
-
According to one expert, this is because the United States is producing a record amount of oil.
-
The softening economic outlook will affect oil demand next year.
Oil prices rose slightly this week, but there is little OPEC+ can do to push prices beyond that point, an energy expert said.
That’s because the United States produced boatloads of oil, reaching record levels of crude oil production and exports.
“OPEC+ simply cannot cut enough to keep the price much higher than where we are now,” John Kilduff of Again Capital. told CNBC Tuesday.
West Texas Intermediate crude oil is trading at $75.94 a barrel, up from levels of around $73 last week. Prices have increased as tensions in the Red Sea increase. Brent crude, the international benchmark, rose to $81 a barrel on Tuesday, up from $79 the previous week.
But oil prices are still well below September highs of $94 a barrel for WTI crude. These falling prices occurred while The United States pumped a record amount of oilflooding markets with oversupply – and this runs directly counter to OPEC’s attempts to drive up prices by cutting production.
More broadly, for oil markets next year, Kilduff predicts a collapse in demand as the global economy slows.
“For the most part, there are headwinds here in terms of the economic outlook,” he said. “The reason why global central banks are cutting rates is not only because the inflationary situation has potentially been brought under control, but also because the economic outlook is improving, and this will have a direct impact on crude oil demand , energy demand, for next year. »
The US central bank is also considering rate cuts next year as key economic data, such as inflation, points to signs of a slowdown in the economy. But rate cuts may not be such a positive sign and more like a positive sign. double-edged sword. According to Kilduff, this could wipe out demand for oil.
At the same time, unrest in the Middle East appears less threatening to oil, Kilduff added, noting that recent attacks by Houthi rebels on key shipping routes would not be a big problem and that markets have not had much moved after other political events like that of the missiles. the Houthi attacks in 2019, or the US drone strike in 2020 that assassinated Iranian Major General Qasem Soleimani.
“We’ll have these pinprick events, there might be some rise in the price of oil, like we’re seeing today,” he said. « Plus, it’s a thinly negotiated deal, so they get that advantage. But as far as escalating the situation, at some point the Iranians will cross a line that will bring them back into their box, or their agents . »
Read the original article on Business Insider
