Experts: The Oil Market is Preparing for a Sharp Increase in Competition

Oil demand is recovering, prices are close to $ 60 per barrel, and this is likely to lead to a softening of the terms of the OPEC + deal to cut production. This opinion was expressed by Vasily Tanurkov, director of the corporate ratings group at ACRA.

According to him, this will allow Russia to increase export volumes, which is now more important for the budget than the growth of quotas. But if the alliance decides to increase production from April, competition will sharply increase, and this is not only the OPEC+ countries. “It will be quite difficult for Russia to regain its share in the global oil market,” Tanurkov said. “If the current prices remain unchanged, one can expect a fairly rapid recovery in US production.”

In addition to Russia and the United States, the main players in the European market before the pandemic were the countries of the Middle East, Kazakhstan and Azerbaijan, says Pavel Evteev, director of the consulting department at Deloitte CIS. In the battle for Europe, suppliers will have to go for additional discounts, which Saudi Arabia already demonstrated in early 2020. Considering the low cost of oil production in the Middle East, the UAE, Iraq and Kuwait will also be able to reduce prices for the sake of market share, Rossiyskaya Gazeta writes.
Another factor that could intensify the struggle for markets is the possible lifting of sanctions on Iran’s oil exports. One of the most exported varieties from Iran, Iran Light, is very similar to the Russian Urals blend. Several years ago, some Mediterranean countries, for example, Greece and Italy, planned to switch to this grade from Russian oil. This did not happen due to US sanctions. If they are removed, Iranian oil will compete with Russian oil both in Europe and in the APR, Vasily Tanurkov is sure.

Boosting production in Iran is unlikely to meet with the approval of other OPEC+ members. The alliance will not be able to demand Tehran contains production volumes after the sanctions. According to Pavel Evteev, in this case, the OPEC+ deal can again become a price balancing instrument, which could smooth out the negative effect of the increase in supply on the market.