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Tariq Siddiqui's picture
COO Upstream EP Advisors LLC

Oil & Energy | Business Development | Capital Projects | Offshore Wind -  Proven leader in offshore development and operations, with 25+ years’ expertise in managing business through cycles...

  • Member since 2021
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  • Jul 12, 2021
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Oil producer group OPEC has been plunged into crisis, with bitter infighting between Saudi Arabia and the United Arab Emirates raising questions about the future of the energy alliance.

 

KEY INSIGHTS

  1. The dispute comes as energy market participants anxiously await policy direction that is likely to share crude markets onto next year. 
  2. The pandemic held them together and now the post pandemic is breaking them apart.
  3. If OPEC+ fails to reach a deal to increase output, prices could skyrocket. 

  4. Rising oil prices could destroy demand growth at some point, and risk the recovery of economic growth just as several economies are starting to reopen after Covid vaccinations rise.

  5. If the talks end in utter discord, there is a risk of a return to an every-man-for-himself production scenario that could cause a reversal of this year’s oil price rally. This may not be the likely outcome, but it cannot be dismissed entirely either. Certainly, it is not a black swan scenario.

 

BOTTOMLINE

Major resource holders are not immune from the disruptions of energy transition. The writing is on the wall for fossil fuel producers, especially the NOC that are laggards in the energy transition. The question is not, will there be a cracks on the OPEC wall but when? The current spat suggests pretty soon.

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Matt Chester's picture
Matt Chester on Jul 12, 2021

If the talks end in utter discord, there is a risk of a return to an every-man-for-himself production scenario that could cause a reversal of this year’s oil price rally. This may not be the likely outcome, but it cannot be dismissed entirely either.

What a fall that would be-- but perhaps something is inevitable sooner or later as the forward-looking power that the oil collective inherently has is dropping each day we get closer to the energy transition

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