One of the key solutions to absorb the Oil glut
Mr. Choeib Boutamine
November 14, 2024
Few days after the start of the war in Ukraine, Oil prices spiked to $ 117 per barrel, but they gradually dropped as a result of the global economic crisis and some measures taken by the Biden administration releasing 180 MBD of oil from the SPR for a six-month period (other releases followed up). Meanwhile, severe sanctions have been imposed Against Russia’s oil as a price cap has been set at $ 60. On the other side, Russia escaped that and developed its shadow fleet, succeeding to market its oil above $ 60.
Amid this critical situation, the OPEC+ quickly reacted to protect the market’s and prices’ stability and launched several cuts reaching 5.83 MBD now. The OPEC+ lowered the forecast for the global oil demand growth at 1.82 MBD in 2024 and 1.54 MBD for 2025, i.e. the market fundamentals will keep looming on global demand despite the different conflicts and wars taking place at once (Ukraine, Palestine, Iran, Lebanon….)
Last June, the OPEC+ decided to resume pumping 180 KBD of oil prior to holding back the market share and also meeting its financial targets of the year; back then prices were above $80. In September, however, the organization hesitated to execute its plan and postponed the resumption of supplies of the volumes mentioned above (in my opinion that gave a negative sentiment to the market and resulted in the prices’ drop below $ 70).
What to do:
How to absorb these volumes from the market: phasing out some metals from the industry could be a genius solution which should be taken into account by the Oil producing OPEC countries. Also, replacing Metals with oil derivatives, like polymers, plastic, rubber and composite materials will help to reduce the weight of the spare parts which will hugely contribute to saving energy.
Petrochemistry is a key solution to reduce carbon emissions and absorb oil from the market; it will help these countries to hire more employees, save the cost of shipping, and reduce carbon emissions (by reducing mechanical energy).
I believe that the ongoing ADNOC’s 16 billion-dollar-deal to acquire Covestro is very interesting, as the German company is one of the leading suppliers of premium polymers.
With its high-tech materials, attracting foreign investments to the OPEC+ countries will benefit these companies thanks to the low cost of energy, the abundance of raw materials, and the virgin market for polymers.
Mr. Choeib Boutamine
RANADRILL CONSULTING
