Oil prices have risen ahead of Thursday’s meeting of the OPEC cartel of oil-producing nations as ministers prepare to set production targets for July at their first meeting since the EU imposed sanctions on Russian cru.
OPEC is under pressure from some members to exclude Russia, the world’s third-largest oil producer, from future quotas, as it could pave the way for Saudi Arabia and the United Arab Emirates to pump more oil.
The price of Brent crude oil futures, the benchmark for the North Sea, rose 2% at one point on Wednesday to $ 117 a barrel. Its US counterpart, West Texas Intermediate, rose a similar amount to $ 116 a barrel. Prices had fallen from a high of more than $ 125 earlier in the week, but bounced back when investors weighed in on how much production could be increased to offset the effect of sanctions.
Ministers representing the 13 OPEC members and 10 non-OPEC producers led by Russia, a group called OPEC +, will meet by video conference on Thursday. They are expected to approve an increase in July of 432,000 barrels per day, the latest in a series of monthly increases announced in September 2021.
Russia is now behind the group, with production expected to fall by 8% this year. The Wall Street Journal reported on Tuesday evening that the fall in Russian production had led some nations, including members of the Gulf states, to suggest excluding Russia from production targets, allowing other members to increase production.
Demand for oil and energy prices has risen over the past year as major economies reopen following pandemic blockades, exacerbated by the aftermath of Russia’s invasion of Ukraine. Rapid price changes have contributed to inflationary pressures and cost-of-living crises around the world as households struggle with rising fuel prices.
Rising prices have led to unsuccessful attempts by US President Joe Biden and UK Prime Minister Boris Johnson to persuade other major oil producers, such as Saudi Arabia, to pump more, which has angered environmental activists who argue that governments should focus on energy efficiency measures that can be reduced quickly. demand. At a meeting in Germany last week, G7 energy ministers called for OPEC to produce more.
Bjarne Schieldrop, chief commodity analyst at SEB, an investment bank, said the dissolution of the OPEC + group would allow Saudi Arabia and the United Arab Emirates to use their surplus capacity to increase production. However, it raised doubts about whether it would ease the pressure on global markets.
“Minds in the EU and the United States are focused on hurting Russian oil revenues,” he said. “More oil from Saudi Arabia and the United Arab Emirates will allow the West to implement stricter bans, forcing Russian oil exports to fall without raising oil prices. So net there would be no additional supply for the market.” .
However, Russian Foreign Minister Sergei Lavrov suggested on Wednesday that Russia hopes to continue working with OPEC.
Speaking to Saudi Arabia during a visit to the Middle East, Lavrov told a news conference: “The principles of cooperation on this basis remain important and relevant.”
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The United States, the EU and allies such as the United Kingdom have imposed sanctions on most of Russia’s key banks involved in the oil trade, and the EU agreed late Tuesday to a partial embargo on oil imports.
The United Kingdom and the EU have also worked together to ban insurers from covering ships carrying Russian oil, another measure to hamper Russia’s exports. London’s Lloyd’s, the world’s oldest insurance market, said on Wednesday it was working closely with British and other governments and regulators to implement global sanctions against Russia.
“Lloyd’s supports and remains focused on enforcing a comprehensive sanctions regime against the Russian state,” Lloyd’s said.
The EU embargo will not include oil transported through the Soviet-era Druzhba pipeline to Hungary, the Czech Republic and Slovakia, and Bloomberg Economics estimated that Russia would still receive $ 285 billion (£ 226 billion). ) this year for its exports of fossil fuels, including gas on which European countries are heavily dependent.