“Kamco Invest”: Oil watchers are sceptical about “excess” production capacity of “OPEC”

Kamco Invest” company stated that oil prices continued to decline over the past two weeks, as concerns about the recovery of demand again clouded the markets, and Brent crude futures fell below the level of $ 100 a barrel for the first time in 3 months on July 12, with the support of The dollar’s strength, in addition to imposing new restrictions to contain the outbreak of the “Covid-19” virus in China.

In a report, “Kamco Invest” pointed out that oil prices fell despite the limited increase in OPEC and US supplies, which led to tightening market conditions, while the continued imposition of sanctions on Russia contributed to restricting oil flows from the region.

The report stated that OPEC production rose by 234,000 barrels per day last June, reaching an average of 28.72 million barrels per day, which is the highest level recorded since April 2020, according to data issued by OPEC secondary sources.

According to OPEC, the increase was mainly driven by higher production by Saudi Arabia, the UAE, Iran, Kuwait and Angola, which was partially offset by lower production in Libya and Venezuela.

KAMCO Invest noted the increase in oil watchers’ doubts about the increase in OPEC production and their doubts about the group’s surplus production capacity, which fell to 4.8 million barrels per day by the end of June 2022.

She pointed to a recent report by Media about Saudi Arabia and Kuwait holding talks to increase production from the neutral zone from 170-175,000 barrels per day to 500,000 barrels per day, indicating that Standard & Poor’s sources indicated that there are operational challenges. It may limit the region’s production to about 250-300 thousand barrels per day in the next five years.

The report noted that expectations of a slowdown in the pace of global economic growth had a noticeable impact on oil prices in recent times, as recession fears prompted hedge fund managers to sell oil-related derivative contracts, amounting to about 201 million barrels during the past four weeks, according to the records issued. For ICE Futures and US CFTC, however, refined product derivatives saw strong support due to limited production capacity and low inventory levels.