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Iraq and OPEC in front of Washington and major oil consumers..Who is winning the crude war?
November 24, 2021
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As part of its steps to calm energy prices, which it sees as driving high inflation rates in recent months, the United States of America decided to resort to its strategic oil reserves, which amount to more than 600 million barrels, which raised questions at the level of OPEC countries, as well as experts who discussed The repercussions of this matter on oil prices, which recently rose with the gradual recovery of the global economy and the attempt to reduce the effects that [You must be registered and logged in to see this link.] on global demand.
The latest US move is an unprecedented, coordinated attempt by five of the world's largest oil consumers to bring down oil prices
The plan to withdraw from US stocks includes 32 million barrels over the coming months, according to the White House statement, which stressed “the speedy implementation of a previously approved plan to release 18 million barrels, bringing the total to 50 million barrels, in addition to coordination with China, India, Japan and South Korea.” ".
Indeed, India said that it would "release five million barrels of its strategic reserves in coordination with the same countries," to be followed by South Korea's agreement to participate in a joint withdrawal from the reserves in response to US demand, while the current oil stockpile in South Korea is 97 million barrels, which is sufficient for consumption. for about 106 days, according to the Korean Ministry of Industry.
Coordination after rejection
This step is an unprecedented attempt through coordination by five of the largest oil consumers in the world to reduce oil prices, and it came after OPEC + refused to raise production more than what was agreed upon by increasing only 400,000 barrels per day every month until April 2022. OPEC + decisions, which see that there is no need to pump more oil into the markets at present, despite calls from the United States for more supplies to curb the rise in prices.
The American decision and the insistence of OPEC +
On the producers side, the OPEC + alliance sees that the occurrence of coordination among major consumers to release a share of the strategic reserve represents a threat to the markets as it is an unwanted contribution to the increase in oil supply, which threatens the market balance that it seeks to achieve since the collapse of prices in April 2020, according to What Bloomberg reported.
Similarly, UAE Energy Minister Suhail Al Mazrouei said in statements published by "Reuters", that "there is no need to increase production at a faster pace than it is currently, expecting an oversupply in the first quarter of next year."
On the other hand, the White House believes that "oil prices are high and affect economic growth, especially after the recent hike in gasoline prices."
"There is no substitute for dialogue"
The uncertainty of the future of prices makes eyes turn to the upcoming OPEC + meeting, amid expectations of violent reactions after the recent decisions of the world's largest economies. The alliance will hold a meeting next week to discuss plans to increase production during the month of January 2022 and to amend the production policy.
The economist, Thaer Al-Faili, believes that "OPEC + only has to increase production to reduce prices, as it has been in history with such crises."
Prices are currently hostage to the owners of an economy affected by the pandemic war, and they are trying to fix it from the gains of crude, as well as consumers whose greed is dominating their markets, in light of a risk that could cause demand to falter due to the spread of Corona virus infections in Europe.
Iraq, whose economy is almost completely dependent on oil prices, expects prices to reach $100 per barrel in the first and second quarters of 2022, with global stockpiles dropping to their lowest levels.
Prior recourse to stocks
Historically, the United States has only withdrawn from stockpiles three times since 1975. The Energy Department says that “it can take only 13 days for oil to reach the US market after a presidential decision,” meaning that the strategic reserve oil cannot have an effect immediately, it must He withdrew it and then sold it in the market in a process that takes about two weeks, which explains the rise in prices despite the decision to withdraw, as a barrel of Brent crude rose to $80.
Other reasons put forward by the Iraqi economist, Thaer Al-Faili, saying that "several factors affect, such as the problem of maritime transport in the world, which has been subjected to a huge, unplanned increase in the size of the global freight market, as prices in some lines have risen tenfold," noting that "the increase in demand on oil after the stagnation caused by the closure of the pandemic,” but he indicated that “most countries are increasing the capacity of their oil stocks more than they were before the pandemic.”
In the event that the United States of America and those with it fail in its last step, the economist confirms in his speech to “Ultra Iraq”, that “there is no alternative but to dialogue with OPEC +, with the expectation of a new rise in crude after the decrease in stocks.”