OPEC and its allies agreed on Thursday to accelerate oil production in July and August, as Saudi Arabia, the backbone of the cartel, succumbed to pressure from the United States to cool a rise in crude oil prices. threatened to stop the world economy.
The cartel said it would increase production by nearly 650,000 barrels a day in the two months, more than the projected increases of about 400,000 b / d.
The move comes just days after the EU agreed to impose a ban on Russian oil imports, raising fears of global energy shortages as Ukraine’s invasion of Moscow continues to shake markets.
Saudi Arabia and the United Arab Emirates, the two largest producers of OPEC, are likely to be responsible for most of the supply increases, and Riyadh has previously indicated that it is willing to increase production to exceed Russia’s shortage.
Additional supplies are the first time the Saudi-led OPEC + cartel has deviated from a measured supply policy agreed in the depths of the oil pandemic two years ago, and comes after months of high-level US diplomacy to repair relations between Riyadh and Washington. .
The White House thanked the “important decision” and credited Saudi Arabia with “reaching this consensus among the members of the group.” He also acknowledged the “positive contributions of the United Arab Emirates, Kuwait and Iraq.”
OPEC’s decision comes just weeks before US President Joe Biden’s planned visit to the Middle East, which may include a stop in Riyadh, despite a difficult relationship with Saudi Arabia’s daily ruler, Crown Prince Mohammed bin Salman.
“Saudi Arabia is still working within the framework of the OPEC + framework to add some additional barrels under political pressure,” said Amrita Sen of Energy Aspects.
Oil prices fell sharply in early trading on Thursday after the Financial Times first reported a possible deal, with crude Brent, the international benchmark, falling to a low of $ 112 a barrel since $ 116 a barrel at Wednesday’s close.
But prices rose marginally after Thursday’s meeting, with Brent trading above $ 116 a barrel, as analysts said relatively modest supply additions may not be enough to calm oil markets, which have soared to the highest level in a decade since Russia invaded Ukraine, fueling inflation. pressures around the world.
An agreement between the UK and the EU to ban insurance on ships carrying Russian oil could drastically reduce Moscow’s exports by the end of the year. Russia was pumping more than 10 percent of the world’s crude supplies before the invasion of Ukraine.
The new OPEC + supply agreement will lead to an increase in the supply already planned for September to July and August, effectively ending the two-year quota system that has helped raise oil prices by almost a quarter. 500 percent from the depths of the pandemic.
Saudi Arabia and other OPEC members remain concerned about the level of surplus production capacity available, so they are still hesitant to increase production too quickly, fearing that the current restriction on the oil market could become a total shortage later in 2022.
OPEC + alluded to continued strong global oil demand in its post-meeting statement, saying “it noted the most recent reopening of the blockades… And the refinery’s overall intake is expected to increase The cartel’s decision “emphasized the importance of stable and balanced markets.”
Weeks of shuttle diplomacy from top Middle East and White House energy envoys Brett McGurk and Amos Hochstein have paved the way for improved Riyadh-Washington relations.
Biden has tried to distance himself from Saudi Crown Prince Mohammed bin Salman, or MBS, as he is known, because of his links to the assassination of Washington Post journalist Jamal Khashoggi. But the United States is ready to improve ties with Riyadh, with energy as the cornerstone of the US-Saudi relationship dating back to the end of World War II.