Current OPEC Deal and its impact on Oil Market

The Iraqi oil minister Thamer Ghadhban earlier said that an agreement between OPEC and its allies to expand oil output cuts until the end of March 2020 will decrease inventories. He added it would help to stabilize the market and address price irregularity. Ghadhban discussed OPEC’s position on oil prices and said the general view of 70 U.S dollars per barrel or higher was acceptable. He added the producer group sought prices that were fair to both producers and consumers. It is important that Brent oil is currently near 65 U.S dollars.

Current OPEC Deal and its impact on Oil Market

The OPEC and allied producers led by Russia earlier agreed to extend oil output cuts. They were looking to prop up the price of crude oil as the global economy weakens and the U.S production grows. Ghadhban also said Iraq hopes navigation in the Strait of Hormuz will remain open and uninterrupted. He was speaking on the sidelines of an energy conference in Baghdad. He added, “No fewer than 18 million barrels pass through the strait every day. The region needs to remain stable”. The Iraqi Prime Minister Adel Abdul Mahdi said that any disruption to oil exports through the Strait of Hormuz will be a major obstacle for the Iraqi economy, which has few oil export outlets.

Abdul Mahdi also said the Iraqi government was studying eventuality plans to deal with possible disruption, including alternative routes for oil exports. It is a major shipping route linking Middle East oil producers to markets in Asia, Europe, and North America. The Strait of Hormuz has been at the heart of regional tensions for decades. The last couple of months have experienced a spell of instability in the region. There were 6 tankers attacked since May following increasing tensions between Tehran and Washington. It is noteworthy that a British oil tanker had turned around before reaching Iraq’s main oil terminal to load its cargo and was anchored off the coast of Saudi Arabia.

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