Good day all. Currently, there is a bit of a bother going on in the Strait of Hormuz. Iran, which wanted nuclear weapons so they could use them on Israel and the United States, was bombed not quite back to the stone age.
Iran’s answer has been to fire missiles at everyone, including countries that, while not friendly, weren’t ready to wipe them off the face of the earth. This is what is known as “A really bad idea.” Iran has also been shooting missiles at ships and laying mines to block the Strait. The United States has responded by blocking any ships going to or coming from Iran, with several fired on when they wouldn’t listen.
In the mean time, the world worrywarts are in a blind panic that since nothing is moving through the Strait of Hormuz, the world is going to run out of oil and everything will stop!! The world is not running out of oil. There is plenty of oil being pumped. The problem is logistics. All the tankers that would pick up oil in the Arabian Gulf couldn’t get in, so they are going elsewhere to get product. One of those places is the Gulf of America. The United States has more oil than we can use. Add to that, Venezuela has doubled production since Operation Yoink removed Nicholas Maduro and are looking to increase it further.
Because of this and other reasons, the OPEC+ nations have announced that they are going to increase the oil quotas that it’s members can pump. Here are the details from Newsmax:
OPEC+ is set to agree on Sunday, June 7th, a fourth increase in oil output targets in as many months, three OPEC+ sources said, even though the U.S. war with Iran is still preventing several of the group’s members from pumping more.
I looked up OPEC+. This is made up of the OPEC countries and a number of others that aren’t formally part of OPEC. The United States is not a member of course, but Mexico is along with Russia. Another is the United Arab Emirates, however they have announced that they are pulling out of OPEC and OPEC+ and will pump as much oil as they can sell.
Other countries are technically exempt from the quotas, such as Mexico, and others are ignoring the quotas because they need the money. Russia is technically not exempt to quotas, but they are burning money in the Ukraine and are basically blocked from selling oil on the world market. (They are ignoring the quota and the sanctions)
The war has cut oil flows via the Strait of ?Hormuz, creating the world’s biggest ever supply crisis as key OPEC+ members including Saudi Arabia have been unable to supply customers in full since the end of February. The crisis for OPEC+ deepened when the United Arab Emirates left the Organization of the Petroleum Exporting Countries after almost 60 years.
Oh, it’s worse than you think. One of the problems is that OPEC, which is a cartel, is the reason that oil prices have been high in the first place. To put it bluntly, it’s simple greed on the part of the oil Sheiks.
Seven core members of OPEC+, which groups OPEC and allied producers including Russia, have increased their output ?quotas from April to June by almost 600,000 barrels per day.
Russia may be increasing production, but they are having trouble shipping it due to sanctions and refining it due to the Ukrainians. The Ukraine has been sending drones further and further into Russia and striking key parts of their oil infrastructure.
In reality, the group’s production has collapsed due to export cuts by Gulf members, averaging 33.19 million bpd in April versus 42.77 million in February, according to OPEC figures.
Part of that is due to the United States and Israel finally saying “Ok Iran. You declared war on us in the 80’s and have been conducting warfare against us since then? Fine. Challenge accepted.
On Sunday, the seven members will likely increase targets by about 188,000 bpd from July, the sources said. This is the same as the June hike, which was adjusted ?down from monthly increases of 206,000 bpd ?in May and April to ?take into account the UAE exit.
The UAE is going to blow a massive hole in those quotas. I believe I’ve seen reports that they are ready to double their production almost immediately, and to further increase it in the next few years. Venezuela, while exempt, is likely to ignore any instructions to limit their production. Then you have all the non-OPEC countries that are part of OPEC+. How many of them are going to look at the bottom line and decide, “Yeah, screw those Arabs. Crank up production now!”
All the sources spoke on condition of anonymity and said a final decision had not been made.
I suspect that they are running into problems with countries just paying lip service to the quotas and ramping up production. It is a sellers market, but as more and more countries that aren’t part of OPEC or OPEC+ ramp up their production, and others deciding that the UAE has the right idea, I think we’re going to see major increases in production and the dropping of oil prices. We shall see of course.
Thatisall
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