00:00Let's have a look at the increase, that is 547,000 barrels a day starting in September.
00:07Do you think that will be a huge impact on pricing and global supplies?
00:13Good afternoon, I'm glad to be here.
00:15No, I don't think so because it doesn't really come as a surprise.
00:19Or to be more precise, this is the last of several tranches to turn to dial back a previous output cut.
00:27And the speed with which the previous total output cut was dialed back, that came as a surprise but started already in April.
00:34So this is the last step in a bigger journey and that last step was by now expected.
00:39And price impact is therefore most likely to be very moderate.
00:44The group says the decision is based on strong economic conditions and low oil inventory.
00:50So from your perspective, are these the real drivers or is your policy playing a bigger role?
00:57Well, if you talk about oil prices in oil markets, you always hear it's demand, supply, short-term things.
01:04It's too much economic growth, not enough economic growth, too much storage in China, not enough storage in China.
01:09I think there is something new now, which we hear in this litany of words, which is that they say that OPEC is gearing up for having higher market share.
01:20And that, I think, is something which is qualitatively new.
01:24But people haven't really gotten their head around what it means.
01:26Why would an oil producer suddenly lower prices and risk prices globally to be much lower just in order to gain market share?
01:35And the answer is probably because he expects something different from the rest of the market or he knows something different from the rest of the market.
01:42And what is this?
01:43In my view, it is the expectation that oil demand growth will slow, plateau or stop, that we reach peak oil demand in the next few years.
01:51And that OPEC wants to be prepared when you have a shrinking market or a stable market.
01:57And if you are a producer, in order just to sell the same volume year after year into that market, by definition, you need to increase your market share.
02:06The market shrinks.
02:07And how do you do that?
02:08You do this by price competition.
02:10At the start of such a process, you don't want to be caught out in a situation with a lot of spare capacity.
02:16And OPEC, after previous cuts, had a lot of spare capacity.
02:19So that's what they are preparing.
02:21That's what behind this phrase of market share gain.
02:24They are preparing for a time when oil demand in the longer term will stay stable, plateau or even decline.
02:31Let's talk about geopolitics.
02:32Let's talk about the U.S.
02:33Could this production increase make it harder for the U.S. to use oil sanctions as leverage against Russia in the Ukraine conflict, do you think?
02:43No, I think the opposite.
02:45I think it makes it easier.
02:46The more oil there is on the market and the less pressure there is on prices, the easier it is for the U.S. to impose sanctions on others.
02:54Don't forget that the U.S. and Trump want low oil prices.
02:58The president has been very clear on that.
02:59And now, if you suddenly would impose sanctions, for example, on Russia or tighter sanctions on Venezuela and Iran, and the market would be as before, the natural reaction would be for oil prices to get up and markets get nervous.
03:13So OPEC, by increasing production now, plays into the cards of the American president and makes these kind of activities easier to sustain for him.
03:22Thank you very much for your insights.
03:24That is Christophe Ruhl, a senior research scholar from Columbia University.
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