International Oil Prices Rise 3% in Two Days

OPEC unexpectedly announced on the 14th that it would cut production by another 500,000 barrels per day starting from February 1 next year. This news directly caused international oil prices to rise by nearly 3% in two trading days, returning to above US$63 per barrel. However, relevant experts pointed out that considering that the scale of OPEC's production cuts is small and the actual implementation remains to be seen, and that international energy demand has not dropped significantly, OPEC's latest decision will not change the mid- to long-term trend of oil prices. Crude oil prices next year may be basically the same. It shows a relatively stable trend and is unlikely to continue to rise or fall sharply.

“Going against the wind” production cuts have drawn strong criticism

Since a production cut of 1.2 million barrels was announced in October, and many countries and international organizations have previously called on OPEC not to rush into action again, OPEC's "anti-wind" production cut has also attracted strong criticism from the international community.

Stimulated by the news of OPEC's production cuts, international oil prices rose sharply on both the 14th and 15th, with a cumulative increase of 2.98%, and the latest price was US$63.22.

International oil prices hit a record high of US$78.40 in mid-July this year. They have finally fallen back in recent months, and OPEC's renewed production cuts have naturally aroused strong dissatisfaction among consumer countries such as the United States.

Crude oil market analysts from the U.S. Energy Information Administration (EIA) said on the 14th that another OPEC production cut is "unnecessary" because the growth in market demand for crude oil next year is expected to exceed the growth in production from non-OPEC members. EIA even pointed out that OPEC even has ample room to increase production in 2007.

The EIA pointed out that according to their supply and demand statistics, crude oil production by non-OPEC members will indeed increase significantly next year, but the increase in market demand next year will be even greater. EIA expects crude oil demand to grow at an average rate of 1.5 million barrels per day, while non-OPEC production growth is only 1 million barrels per day.

Eagles, director of the International Energy Agency's oil market analysis department, also said that given that the supply of the oil market has become tight, OPEC's decision to further reduce production is "unpopular," especially considering that the current oil price is already high and Supply risks are also rising further, and the peak winter heating oil season has begun.

Limited impact on crude oil supply and price

"OPEC's decision to cut production again just shows a direction, saying that they hope that oil prices will return to the level that the organization hopes to reach," Tong Lixia, an associate researcher at the China Ministry of Commerce Research Institute who specializes in energy issues, told reporters.

Experts analyzed that OPEC’s last production cut has not been fully implemented. The reason why it has announced another production cut now is that it realized that the implementation of previous production cuts was not effective.

According to preliminary expected data released by oil tanker consulting agency Petrologistics last week, OPEC's daily oil production in December will be roughly the same as in November. Statistics show that the daily output of the 10 OPEC members that implement quota restrictions was 27.3 million barrels in December, 100,000 barrels less than the previous month, but still 1 million barrels higher than OPEC's November production target. If OPEC fully implements its decision to cut production by 1.2 million barrels from November, the organization's current actual daily production should be 26.3 million barrels.

Tong Lixia pointed out that the reason why many OPEC member countries do not want to start cutting production "starting from me" is because the current oil price level is still higher than their expectations.

"I don't think OPEC's decision will have a particularly big impact on the market," Tong Lixia said. "The supply and demand of the oil market next year will not change much." She analyzed that in terms of supply, non-OPEC countries will increase production next year. It may exceed previous years, and in terms of demand, the U.S. economy is not cooling as severely as expected, so energy demand will still maintain rapid growth. However, in general, Tong Lixia believes that oil prices will not see the skyrocketing situation of previous years next year.