Opec and its allies on Thursday agreed to ramp up oil production in July and August, as Saudi Arabia bowed to US pressure to cool an oil price spike that threatens to stall its economy. global economy.
The cartel said it would increase production by nearly 650,000 bpd in both months, up from a planned increase of about 400,000 bpd.
The move comes just days after the EU agreed to impose a ban on Russian oil imports, raising fears of a global energy shortage as Moscow’s invasion of Ukraine continues to wobble. market.
Saudi Arabia and the United Arab Emirates, two of Opec’s powerhouse producers, are likely to account for most of the increased supply, with Riyadh previously signaling that it was prepared to ramp up production to overcome Russia’s shortage.
The extra supply is the first time the Saudi-led Opec+ team has deviated from the calculated supply policy agreed upon during the oil pandemic two years ago, and comes months after high-level US diplomacy aimed at repairing relations between Riyadh and Washington. .
The White House welcomed the “important decision” and credited Saudi Arabia for “reaching this consensus among team members.” It also noted “the positive contributions of the UAE, Kuwait and Iraq”.
Opec’s decision comes just weeks before US President Joe Biden’s scheduled visit to the Middle East, which could include a stopover in Riyadh, despite a fractured relationship with the rowdy ruler. Day of Saudi Arabia, Crown Prince Mohammed bin Salman.
“Saudi Arabia is still working within the Opec+ framework to add some more barrels under political pressure,” said Amrita Sen at consultancy Energy Aspects.
Oil prices fell sharply in early trading on Thursday after Financial Times first reported on a possible dealwith Brent crude, the international standard, fell to a low of nearly $112 per barrel from $116 per barrel at Wednesday’s close.
But prices edged up slightly after Thursday’s meeting, with Brent trading above $116 a barrel, as analysts say the relatively modest additional supply may not be enough to appease the already bullish oil market. to the highest level in a decade since Russia invaded Ukraine, triggering inflation. pressure around the world.
A tentative deal between the UK and the EU to ban insurance for Russian tankers could drastically reduce Moscow’s exports later this year. Russia pumped more than 10% of the global crude oil supply before invading Ukraine.
The new Opec+ supply deal will bring about the planned increase in supply from September to July and August – effectively ending the two-year quota system that has sent oil prices up nearly 500% since the pandemic disaster.
Saudi Arabia and other Opec members, still concerned about the level of spare production capacity currently available, are hesitant to increase output too quickly, fearing that the current tightening of the oil market could turn into a shortage. will be completely depleted by 2022.
Opec+ referred to continued strong global oil demand in its statement after the meeting, saying it “recorded the most recent reopening from shutdowns. . . and the number of global refineries is expected to increase”. The decision on the cartel “highlights the importance of a stable and balanced market”.
Weeks of shuttle diplomacy by the White House’s top envoys for the Middle East and energy, Brett McGurk and Amos Hochstein, paved the way for an improvement in relations between Riyadh and Washington.
Biden has tried to keep his distance from Saudi crown prince Mohammed bin Salman, or MBS, as he is known, due to his involvement in the murder of Washington Post journalist Jamal Khashoggi. However, the United States wants to improve relations with Riyadh, with energy being the cornerstone of the US-Saudi relationship that has lasted since the end of World War II.
