The group has finally given in to months of pressure from major consumers to help alleviate the pain of high energy prices.
By Salma El Wardany and Ben Bartenstein and Grant SmithBloomberg
Posted on June 2, 20222 June 2022
OPEC + will increase the size of its oil supply rises by 50%, yielding to months of pressure from major consumers, including the US, to help alleviate the pain of high energy prices.
Ministers agreed on Thursday that the group should add 648,000 barrels of oil per day to the market in July and August, compared to 432,000 barrels per day in recent months, delegates said, asking not to be named because the talks were private.
The increase would be distributed proportionally among the partners in the usual way, delegates said. Countries that have not been able to increase production, such as Angola, Nigeria and, more recently, Russia, would still have a higher share. This could mean that actual supply increases are lower than the official figure, as has often been the case in recent months.
Oil reduced losses in New York, trading 0.9% lower at $ 114.26 a barrel at 9:23 local time.
Opening the taps is a major turning point for the Organization of the Petroleum Exporting Countries and its allies. The group, led by Saudi Arabia, has stubbornly adhered to its plan for gradual monthly supply increases even after the invasion of Ukraine by Russia, a key member of the group, turned the tide. world markets and raised energy prices. The cartel has so far avoided discussing the crisis at most meetings, saying it is a matter of politics rather than markets.
Additional increases in OPEC + supply are likely to come from a number of countries. Only Saudi Arabia and the United Arab Emirates have significant volumes of surplus capacity that could increase rapidly. Many other members have been struggling to achieve their production goals for months.
Russian production has fallen significantly since the invasion of Ukraine by a combination of Western sanctions, shipping difficulties and rejection by some traditional customers. Its production was 1.3 million barrels per day below the OPEC + target in April, according to the International Energy Agency.
White House political pressure may have led to a change in Saudi policy. The kingdom’s foreign minister said last week that there was nothing more he could do to dominate the oil markets, and even suggested that there was no oil deficit.
“Although we initially thought that this policy change would probably coincide with a meeting between President Biden and Crown Prince Mohammed bin Salman, we now believe that the expiry of the OPEC + agreement could reach the ministerial meeting of tomorrow, “said RBC strategists, including Helima Croft. in a note Wednesday afternoon. “The remaining barrels could be added in July and August.”
–With the assistance of Fiona MacDonald.