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OPEC long-term outlook with crude at 3-year highs: rosy

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By DAVID McHUGH

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It wasn't mentioned specifically, so here it is, distilled from the WOO:

The report warned that output is expected to remain below 2019 levels, even as demand recovers sharply, due to underinvestment in some OPEC+ producers. The organization expects demand to expand by 1.7 million bpd in 2023 to 101.6 million bpd.

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For whatever reason, the Biden administration decided to make the US dependent on OPEC’s supply decisions. So, Americans should now expect higher prices on gas.

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For whatever reason, the Biden administration decided to make the US dependent on OPEC’s supply decisions. So, Americans should now expect higher prices on gas.

In March of 2020 Saudi Arabia greatly increased oil output leading to a drop in oil prices to the low $30s per bbl. The Saudis did this to put US based shale oil producers out of business. At prices much below $50 a bbl, shale oil isn't profitable to produce in the US. Unlike the last time the Saudis did this, investors did not rush to prop the shale oil producers up and they went out of business in large numbers. In addition it was becoming clear there was a global pandemic that would reduce the demand for oil on a global scale. You might not have been aware but the market was so glutted with oil that sellers were chartering tankers to store it on, to the point that shipping operators could make more money storing oil on their tankers than by moving it across the oceans. In April of 2020 oil futures traded in negative numbers, a first! What that means in market terms is that oil producers were willing to pay people to take the oil off their hands. This was months before the Presidential election. Oil producers shut down wells all across the US and laid the workers off.

These same oil companies did not see the sudden increase in demand coming and were not ready for it. Once a well is shut down you can't just turn it back on. The oil hardens in the bore and doesn't flow. The well has to be cleaned out with a special clean out rig to restore flow so it can resume production. You can only do that so fast and oil producers have to ask themselves if demand will remain high and make it worthwhile to run clean out rigs, which are limited in number btw, through their wells and get the oil flowing again. As it turns out the oil producers misread the market and didn't get their wells up and running fast enough to meet demand, so prices rise. By the time President Biden was inaugurated the oil companies were already too far behind to catch up. You also are missing the wild swings in demand elsewhere in the world affecting prices. There is a glut of diesel in Asia but that doesn't help the US.

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For whatever reason, the Biden administration decided to make the US dependent on OPEC’s supply decisions. So, Americans should now expect higher prices on gas.

An additional consideration is the US embargo in Venezuelan oil. Not all oil is the same quality and oil refineries are equipped differently for different kinds of oil "feedstock". Venezuelan oil is sour", meaning it's high in tar and sulfur. The refineries in the Gulf Coast that used Venezuelan feedstocks were left without an oil source when the embargo was instituted. Brent crude is "sweet", meaning low in tar and sulfur and is not compatible with those Gulf Coast refineries. Likewise for Nigeria's "Bonny Light" and West Texas Intermediate. Too sweet to run through those refineries without a lot of expensive equipment changes. The Gulf Coast refineries ended up buying oil from Russia which is similarly sour.

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