According to a senior executive at Vitol Group, the world’s largest independent oil trader, OPEC+ appears to control crude prices as U.S. output lags behind pre-pandemic levels. Mike Muller, Vitol’s president of Asia, said at an online conference on Sunday that the reduction in U.S. drilling and output left little competition for the producers’ group’s efforts to manipulate markets.
Last week, Brent crude closed above $70 per barrel for the first time in two years, as customers demanded more oil than producers could supply. Oil companies in the United States still use only half of the rigs they had before the coronavirus hit. Meanwhile, as demand recovers, OPEC+, the group led by Saudi Arabia and Russia, is easing barrels back onto the market.
Muller said, “There’s a perception in the market that control is with OPEC+. It will take a long time for U.S. oil to come back to production levels seen before the coronavirus outbreak.” Last week, the OPEC and its partners decided to continue relaxing output restrictions in July. Still, they left markets guessing about what would happen the rest of the year.
The business still has around 6 million barrels per day of idle capacity after decreasing output by 10 million barrels per day or a tenth of daily global demand. According to Muller, China’s economy will continue to expand, boosting oil demand and reducing crude stocks. Domestic refineries will certainly process more naturally as the economy grows and regulations change, he said. Keeping inventory is a waste of money. From a purely commercial standpoint, de-stocking must continue.