The crude oil price is expected to trade between $80 and $90 in the coming years. This happens because multiple organizations and countries are lobbying for a stable price at an elevated level. These are:
- To maintain government budgets in balance, a good number of OPEC are interested in high oil prices. For instance. Saudi Arabi said that it would cap Aramco’s oil production at 12 million barrels per day, down from 13 million. This cut occurs even though it has made substantial investments to increase its minimum production at 13 million barrels a day.
- Historically, OPEC and its allies, controlled oil deliveries to the DM, and it has demonstrated a preferred price range of $70 to $100 per barrel, with a strong intervention to take corrective action should the price go outside those bounds.
- With the arrival of shale oil, this got however challenged. With the rapid development of shale oil, the US has checked out the dominance of OPEC. Yet, in the meantime, horizontal rig count in the US is close to an all-time low, which in turn makes US producers more dependent on a stable and high price for the WTI too. In fact, US-based shale oil producers are no longer the marginal arbiter of the global oil supply and price fixer.
- With global inventories at around 60 days of supply, other countries, such as Canada, Brazil, Guyana, Colombia, and Russia, among others, are suddenly the center point of the pricing fixing strategy. All oil-producing countries suffer from the same increase in costs. The PPI for oil and gas drilling has increased more than 20% since 2019. In contrast, long-dated oil futures prices remain in the $60-70 range, where they centered in the 2017-19 era. Hence these countries are equally interested in benefiting from stable and high prices, allowing them to sell spot some of the production.