Why oil majors are not producing more oil
28 Jul, 2022
Category: Energy
Tags: Crude Oil
Lack of confidence in future oil prices is the major reason.
Oil prices are high but oil producers are not expanding their capacity. Why?
Because the market expects oil prices to fall in the future.
Here is a snapshot of the spot and futures prices for WTI Crude Oil.
The supply of oil will only increase when future prices are high so that oil producers can lock in their selling price now. This will incentivize production by giving producers a higher guaranteed price for when the wells start actually flowing.
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