The Organization of Petroleum Exporting Countries (OPEC) continues to boost oil production, with more than 500,000 additional barrels per day set to hit global markets in August, in a bid to regain market share lost to other oil producers, an energy expert says.
“They’ve signalled this to the market for quite some time now,” Andrew Botterill, energy, resources and industrials partner at Deloitte Canada, told BNN Bloomberg in an interview on Tuesday.
“Post-COVID we saw a lot of economies kind of wake up and a lot of demand increases, and we saw all-time highs for production from the U.S.; Canada as well was included. So, as (OPEC) has seen countries invest and invest in their energy, OPEC is trying to get their share back.”
The planned production hikes from the oil cartel come as global energy demand remains strong, Botterill said.
“We do have very robust demand around the globe. That’s the reason why we’re still talking about high US$60 oil right now is because demand is quite strong, giving opportunity for OPEC to increase those volumes.”
West Texas Intermediate (WTI) crude was hovering above $68 a barrel in early afternoon trading on Wednesday, while Brent crude was trading just above $70.
OPEC’s plan to raise oil production by 548,000 barrels per day next month will mark the fourth consecutive monthly increase. Botterill said the hike isn’t likely to have a dramatic increase on prices.
However, he said he’ll be watching oil prices carefully for the rest of the year as production hikes take hold, since there could be downside risk to prices if markets become oversupplied.
“I think from the long-term sustainable standpoint, they’d like to see themselves still creating a material part of the market and being able to have that influence. At the same time, they’re trying to manage their own revenues and needs as a group of countries,” said Botterill.
“They’ve seen an opportunity here in the last four months to take increases, and we haven’t seen an exceptionally tough market response to it, meaning there’s enough demand out there for some of these volumes, and we’re not seeing massive downward shifts in price like we may have feared.”
