The group of oil producers known as OPEC Plus approved a small increase in production on Wednesday, just over two weeks after President Biden visited Crown Prince Mohammed bin Salman of Saudi Arabia to seek assurances that the group would act to cool oil markets.
The Organization of the Petroleum Exporting Countries and its allies said they would increase production 100,000 barrels a day in September, far less than the nearly 650,000 barrels a day that the group agreed to add in July and August. OPEC Plus has now raised output to roughly prepandemic levels, but global oil supply is still low, and high energy prices have contributed to skyrocketing inflation around the world.
Politically, the paltry increase in output — less than one-tenth of 1 percent of global oil demand, the smallest boost in memory — would appear to be a snub of Mr. Biden, who went to Saudi Arabia seeking added production from major oil producers in the Middle East in order to ease gasoline prices. Raad Alkadiri, Eurasia Group’s managing director for energy and climate, said the increase was so small that it was effectively meaningless.
“It is a rounding error at best,” he said, akin to Saudi Arabia’s brushing off the White House by saying: “There you go — we’ve given you 100,000 barrels a day. Now get off our backs.” He said the move would not ease prices, nor was it a signal of any immediate intent to deliver more barrels to global markets.
Saudi Arabia’s decision not to increase production further was based on its own political and national security interests, not on Washington’s, Mr. Alkadiri said. Saudi Arabia’s ability to increase output significantly is limited, he added, and “for the Saudis to be able to play their role as the central bank of oil, they need to make sure they have significant volumes they can bring on in case of an emergency.”
U.S. officials have said they expect OPEC Plus, which has Russia as a co-chair, to lift output in the coming months. Ed Morse, the global head of commodities research at Citigroup, said Mr. Biden had probably gone into the meeting with the crown prince understanding that Saudi Arabia, the de facto leader of OPEC, would not agree to any significant increase in production.
Oil prices rose immediately after the announcement but later traded down by more than 2 percent. Oil prices have fallen from recent peaks but remain high, buoyed by sanctions on the Russian economy because of its invasion of Ukraine. Brent crude, the international benchmark, was about $98 a barrel, and West Texas Intermediate, the U.S. benchmark, was around $92. A year ago, oil was trading at between $60 and $70 a barrel.
Analysts said concerns about weaker demand for energy, as economic growth slowed and central banks raised interest rates to fight inflation, also might have discouraged the cartel from raising production significantly.
Damien Courvalin, the head of energy research at Goldman Sachs, said the decision was a reflection of the significant uncertainty about the state of the oil market, including the risk of a recession and lower demand from China.
“Is that an environment where you’d want to do a lot more?” he said. “From their perspective, it’s a justifiable, cautious approach.” He also cited risks of falling production from Russia, Libya and Iraq.
The move also reflected constraints on the group’s ability to deliver more production, analysts said. Many of its 23 members are already missing production targets because of a lack of investment in production capacity. OPEC Plus said in a statement that availability of spare capacity was “severely limited” because of chronic underinvestment in the oil sector.
It’s still unclear what effect Western sanctions will have on Russia’s oil production, said Caroline Bain, the chief commodities economist at Capital Economics. Output could fall significantly over the next year, not just as Russia struggles to find buyers for its crude but also because of the lack of access to Western technology, spare parts or financing in some cases.
But increased output from OPEC and its allies over the coming months, combined with lower demand because of a looming recession in Europe and a slowdown in the United States, would help drive prices lower, Ms. Bain said.
“We’ve not only got lower growth on the horizon, but we’ve also got high inflation, which is going to eat into disposable incomes and give people less money to spend on discretionary goods and travel,” she said. “If you’re a family of four, you maybe won’t go for a drive to the seaside because it’s going to cost so much.”
"oil" - Google News
August 03, 2022 at 11:19PM
https://ift.tt/Xc7sYin
OPEC Plus Members Agree to a Small Increase in Oil Production - The New York Times
"oil" - Google News
https://ift.tt/5LmZerI
Shoes Man Tutorial
Pos News Update
Meme Update
Korean Entertainment News
Japan News Update
Bagikan Berita Ini
0 Response to "OPEC Plus Members Agree to a Small Increase in Oil Production - The New York Times"
Post a Comment