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SINGAPORE, Sept 26 (Reuters) – Global oil inventories are expected to rise next year amid weaker demand and a stronger U.S. dollar, leaders told an oil conference on Monday, adding that OPEC will have to cut production to reduce supply if it wants prices. to stay supported.
Oil prices rose above $100 a barrel after Russia, the world’s largest exporter of crude oil and fuels, invaded Ukraine in February. But prices slid off their highs of nearly 40% amid fears that an economic slowdown could weaken demand.
Brent crude and US West Texas Intermediate (WTI) crude prices fell to their lowest level in eight months on Monday, last trading around $85 and $78, respectively, weighed by a stronger US dollar and fears that rising interest rates could tip major economies into recession and reduce demand for oil.
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OPEC would have to make oil cuts of 1 to 1.5 million barrels a day to keep Brent prices above $90, said Gary Ross, chief executive of Black Gold Investors LLC, which looks also expects oil inventories to continue to build in the first quarter despite the decline in Russian oil. production.
“We could be in contango in the first quarter if OPEC doesn’t cut, so if they want to see prices at $90 on their balance, they’re going to have to cut,” Ross said.
Others agreed that stockpiling will cap prices, but fears will increase when European sanctions come into effect on December 5.
A European Union embargo on Russian crude and petroleum products over the next few months could also tighten supplies and push up prices, although G7 countries hope to minimize supply disruptions by implementing a price cap mechanism.
“I think stocks will rise next year as demand slows and production increases…but it all depends on whether Russian oil is flowing or not. That’s the elephant in the room,” Fereidun Fesharaki, Founder and chairman of energy consultancy FGE, told Reuters on the sidelines of the conference, as Russian oil bans loom. Read more
A successful relaunch of the Iran nuclear deal will also lead to a buildup of stocks “in a significant way”, he added, leading to production cuts by OPEC+, or the Organization of Exporting Countries. of oil and its allies.
“The near-term oil price outlook (has) all to do with sentiment, signals from China and fear for the future. But when we get to December 5, if Russian oil is stuck, prices will be $120 or more.”
CHINESE DEMAND GROWTH
However, refiners in China, the world’s largest crude importer, expect Beijing to release up to 15 million tonnes of petroleum product export quotas for the rest of the year to support exports. falling. Such a move would increase global supply and lower fuel prices, but could support demand for crude from China.
At least three Chinese state oil refineries and a private mega-refiner plan to increase cycles by up to 10% in October compared to September, in view of stronger demand and a possible increase in exports fuel in the fourth quarter. Read more
“The refiners, the state-owned companies, have been pushing to export more product…in an effort, I think, to try to increase exports and help support the yuan and the trade balance,” Ross of Black Gold Investors said.
He added, however, that it would be difficult for Chinese refiners to reach 15 million tonnes of exports by the end of the year “because it’s just around the corner.”
“I think they will export a little less than that, and it’s not clear at this stage, but it doesn’t look like the quotas will carry over into next year.”
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Reporting by Isabel Kua, Emily Chow, Muyu Xu and Florence Tan; Editing by Jacqueline Wong
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