Oil-producing countries refuse to increase production, and international crude oil market faces supply gap

Earlier, US President Trump has repeatedly called on oil-producing countries (OPECs) and other oil-producing countries to increase production to lower crude oil prices. However, after the main OPEC and non-OPEC oil producers meeting held last Sunday, they did not issue a statement on increasing production.

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Since then, international oil prices have continued to strengthen. After Monday’s close, at 19:30 on the 25th, Beijing time, Brent crude oil futures price rose 0.54% to 81 US dollars per barrel, and New York crude oil futures price rose 0.44% to 72.39 US dollars per barrel. Market participants pointed out that oil-producing countries have not reached consensus on increasing oil production or continue to boost international oil prices, and the crude oil market will face a supply gap in the next three to six months.

US pressure is invalid

On Sunday, OPEC and non-OPEC oil-producing countries held a meeting in Algeria. The failure to form a consensus on increasing production at this meeting is an important cause of the surge in international oil prices. The oil-producing countries “disregarded” the remarks made by US President Trump’s request to “reduce oil prices” and did not intend to immediately increase crude oil production.

According to foreign media reports, representatives of major oil producing countries said that the participating parties reiterated 100% compliance with the goal of reducing production. In the case that OPEC and non-OPEC oil producers have agreed to increase oil production in June, it is impossible for participants to suggest further increases.

Saudi Oil Minister Khalid Falih said that the global crude oil market is balanced, so measures that affect oil prices will not be taken. He pointed out that Saudi Arabia has spared no effort to increase crude oil production, but “not now” may not be necessary next year, because according to OPEC’s forecast, non-OPEC production growth may exceed global demand growth. The interim report released by OPEC predicts that the supply of non-OPEC oil producers led by the United States will increase by 2.4 million barrels per day in 2019, while global oil demand will only increase by 1.5 million barrels per day.

Falih pointed out that the focus is turning to 2019. It has already gained an understanding of the prospects for an increase in inventories in 2019, which is caused by a substantial increase in supply from non-member states. “The news I got was that there is sufficient supply of crude oil. I don’t know which refineries that need crude oil can’t get crude oil. Given the quantity seen so far, it is very unlikely to increase production in 2019, unless there is any accident on the supply and demand side.”

Russian Energy Minister Alexander Nowak also believes that there is no need to immediately increase crude oil production. Trade disputes and US sanctions against Iran are bringing new challenges to the crude oil market.