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Investors’ eyes are on the discussions taking place today between the thirteen members of OPEC and their allies led by Russia. This meeting comes at a time when crude prices are at their highest in seven years, which suggests that an increase in production is not excluded to lower prices.
Analysts are divided on the issue. Some believe that the exporting countries will stick to their strategy established in May 2021, that is to say a monthly increase in production at the rate of 400,000 barrels per day. While others think a bigger upside is not out of the question given the high prices. If nothing changes, prices are likely to continue to rise, the CEO of the hydrocarbon giant Chevron even sees a barrel at 100 dollars for American oil in a few months.
The causes of such a rise are the same as those that have driven prices up in recent weeks. Growing tensions between Moscow and the West over Ukraine and the war in Yemen pose threats to the supply side. The two major black gold producers Russia and Saudi Arabia are directly involved in these crises. Markets are also tight due to the difficulties of some countries to increase their production due to infrastructure problems and under-investment.
On the demand side, consumption remains dynamic despite the pandemic. Result: supply should remain, in the short term, lower than demand. The solution could come from Iran, a major historical OPEC producer whose exports are very limited because of American sanctions. Discussions between Western powers and the Islamic Republic regarding its nuclear program entered the home stretch this week, with the United States participating indirectly. If agreed, the sanctions could be lifted gradually; Iran would thus return to the oil market with an abundant supply enough to immediately lower crude prices.