Can Thursday’s OPEC Meeting Save Oil Prices?

So, a 1.6M increase is more of a 0.6M increase over where the market was reasonably expecting. This in line with recent production increases. And it wouldn’t change the curve we’ve seen since the bottoming out of crude production and prices.

While considering the demand for oil, we have to be mindful of its nearest competitor: natural gas. LPG prices have been on the rise after President Biden has already taken measures to slow new exploration of natural gas through fracking.

It doesn’t stop current production, nor new production on private land. Meanwhile, inclement weather has concurrently driven up demand.

About 13% of the US’ electricity can switch between oil and natural gas as an energy source. Many homes and industrial appliances have flex-fuel capacity. Not only has the price LNG returned to pre-covid levels, but it has also far exceeded them.

Also, unlike crude, it’s substantially harder to transport, particularly across the ocean. This makes it a more domestic-demand product.

As OPEC+ considers their production targets for the next couple of months, it would be useful to keep in mind the price ratio for thermal output between natural gas and crude.

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