The OPEC oil cartel and its allies decided on Wednesday to raise production in September at a much slower pace than in previous months at a time of high gasoline prices and unstable energy supplies exacerbated by the war that Russia is carrying out in Ukraine.
OPEC, led by Saudi Arabia, and its allies, led by Russia, said they would raise output to 100,000 bpd next month after raising it by 648,000 bpd in July and August . The group considered what effects surprising inflation and rising COVID-19 rates might have on global fuel demand in the fall.
It comes after US President Joe Biden visited Saudi Arabia last month, aiming to improve relations and encourage more oil production from the cartel to lower high pump prices. Although gas prices have been falling, they remain high and pose a political problem for him as inflation rises.
No oil production deal was announced after the meeting, but Biden said he expected OPEC to take steps to increase output in the coming weeks. Those hopes did not materialize.
As a result, “the United States may go to other sources of oil, whether it’s Venezuela or Iran,” said Jacques Rousseau, managing director of Clearview Energy Partners.
USA trying to increase production
The Biden administration is also encouraging the US oil and gas industry to increase production.
“You just saw the second-quarter results for some of these companies. They’re record profits,” Amos Hochstein, the State Department’s senior energy security adviser, told CNBC on Wednesday. “They should reinvest those dollars into increased production.”
The OPEC+ coalition had cut output during the pandemic as oil prices and demand plummeted, and those cuts are due to expire in September. The group has been adding more oil and gas to the market as economies recover.
Some OPEC nations, such as Angola and Nigeria, have been producing less than the agreed amount. Saudi Arabia and the United Arab Emirates, on the other hand, have the capacity to increase production.
OPEC’s decision appears to be an attempt to appease countries that cannot produce more, Rousseau said.
“Every time you increase the target, there are countries that cannot participate,” he added. “If you only increase production by 100,000 barrels per day, that’s just a small piece for everybody.”
High oil prices may persist
As a result, the amount of oil in the market may not keep up with demand, so high oil prices may persist for some time.
Oil prices rose sharply after Russia invaded Ukraine in February. It was down slightly since the last OPEC meeting, but rose modestly on Wednesday.
A barrel of benchmark US crude was selling for just over US$94 on Wednesday, compared with more than US$105 a barrel a month ago. Brent crude, the international standard, was selling for just over $100 a barrel on Wednesday, also about $110 less than a month ago.
Russia’s oil and natural gas exports to the world have declined as many nations imposed sanctions or restricted purchases from the main supplier over its invasion of Ukraine.
Russia has also reduced or cut off natural gas to a dozen European countries, pushing up energy prices even further, squeezing people’s purchasing power and threatening to trigger a recession if nations can’t store enough gas to get them through the winter
Change in OPEC leadership
It was the first official monthly meeting of the OPEC+ group since its leader, Mohammad Sanusi Barkindo, died at the age of 63 in his native Nigeria last month.
Haitham al-Ghais, a veteran of the Kuwait Petroleum Corporation, took over as OPEC secretary general this week.
In the US, a gallon of regular gasoline sold for an average of $4.16 on Wednesday.
That’s substantially lower than in June, when the national average topped $5 a gallon, but it’s still painfully high for many frontline workers and families and about 31 percent more than what drivers were paying a year ago. year.