Wall Street Hoping OPEC Will Keep Oil Prices Under $100/Barrel

New York, NY, April 16, 2024-"The specter of a widening war in the Middle East has put $100-a-barrel oil back on the table,” reports the Wall Street Journal. “But Wall Street is looking elsewhere in the region for hints about how high prices could go. 

“The Saudi-led Organization of the Petroleum Exporting Countries (OPEC) and its Russia-aligned counterparts have dialed back production of millions of barrels of oil a day in recent years. Investors are betting that spare capacity, which the countries could yet tap in to, will effectively put a cap on oil prices-and protect Americans from an inflationary shock.

“Benchmark global prices have increased 23% since mid-December, recently nearing their 2023 highs. The climb has pushed up the cost of driving to work, shipping groceries and running farm equipment. That has buoyed inflation across an American economy that is still running hotter than the Federal Reserve would like.

“Iran’s largely thwarted strike on Israel in recent days has added new uncertainty to the market. Prices rose Friday in the lead-up to the Islamic Republic’s barrage of drones and missiles. On Monday, as officials in Washington and elsewhere tried to dial down tensions, front-month futures for Brent crude dropped 0.4%, to $90.10 a barrel.

“‘OPEC’s market power is more important this year than last year,’ said Jorge León, senior vice president of the consulting firm Rystad Energy. 

“Members led by Saudi Arabia began a series of output cuts in 2022 that reduced the OPEC+ slice of global supplies to less than 34%, according to Rystad. That is the smallest amount since OPEC joined with a Russian-led producers’ group in 2016. Still, the Biden administration’s unprecedented release of oil reserves, followed by gushers of production in the U.S., Brazil and elsewhere, filled the supply gap and kept prices in check.”