Commodities: Oil industry and global trends
Oil sector continues to struggle with problems caused by the trade war and global economic issues. There are other issues as well. One of them is oversupply which can affect the oil prices. Oil-producing countries are trying to find the best way how to respond to challenges. However, there is no universal solution.
The oil sector’s role in every country’s economy is different, and that makes practically impossible to find the perfect solution. OPEC and its allies should work together, but they should take into consideration the ongoing problems.
Oil prices fell on Friday. The price of Brent futures decreased by 20 cents to $60.18 a barrel. Meanwhile, the price of West Texas Intermediate (WTI) fell by 27 cents to $54.82. Despite the problems, the price of Brent crude rose by 12% since the beginning of the year.
The positive news regarding the trade war proved insufficient to stabilize the oil prices. Chinese and U.S. representatives will meet in October. Nevertheless, this is not the only factor which is vital for the oil industry. Another one is the oversupply and its influence on the oil industry.
On Thursday, OPEC and its allies as they are known as OPEC+ met in Abu Dhabi. Two OPEC member states Iraq and Nigeria promised that they would enforce the oil cuts. It is worth mentioning that these countries failed to comply with the agreement. According to several OPEC delegates, there is a chance that the organization will take additional measures in 2020 to cut the production. The energy minister of Saudi Arabia stated they would discuss this issue in December at the OPEC+ meeting.
Oman’s and Venezuela’s oil sector
Oman’s Minister of Oil and Gas Mohammed bin Hamad AI Rumhy made an interesting comment about the current oil prices. He said it is every producer need higher oil prices. Rumhy stated that $80 per barrel is way better than $60 per barrel. However, he noted that there is a minimal chance to achieve such prices. He said producers should get used to the current prices. His comment once more emphasized that oil producers are in difficult position.
Oman is not a member of OPEC. However, the country is part of the non-OPEC producers led by Russia. Oman joined forces with OPEC members when they reached an agreement to cut the oil production. This decision makes sense for Oman as the country needs higher oil prices to balance its budget.
Another country which is trying to deal with problems is Venezuela. The case of Venezuela is far more complicated than Oman. The South American country is battling an economic crisis for several years. The oil prices are an issue, but Venezuela has more pressing problems to deal with before thinking about the price.
This problem is the sanctions imposed by the U.S. on the Venezuelan state-owned company PDVSA. Despite all of the issues Oil Minister of Venezuela Manuel Quevedo is confident about the future of the local oil sector.
The local oil industry is facing multiple problems. The data provided by OPEC’s secondary sources underline the severity of the ongoing crisis. For example, in July daily oil production was 712,000. It means that in comparison with the August 2018 production fell by more than 600,000 barrels per day.
Oil prices decreased on September 13. The successful completion of the trade talks in October may ease the pressure on the oil sector.
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