What OPEC + will (not) do on oil
Opec +, the group led by Saudi Arabia and Russia, will increase the oil supply by just 100,000 barrels a day. Here because
OPEC +, the group that brings together some of the major crude oil exporting countries, is expected to increase collective oil production levels by just 100,000 barrels a day from September. That's a tiny amount, equal to meeting global oil demand for 86 seconds.
Two anonymous sources revealed to Reuters that the value was approved by representatives of the organization during a closed-door meeting, without any particular discussion.
AN "INSIGNIFICANT" QUANTITY
Raad Alkadiri, energy analyst for the consulting firm Eurasia Group, spoke of a quantity “so small as to be insignificant. From a physical point of view it is a marginal trifle. As a political gesture it is almost an insult ”.
THE JOURNEY OF BIDEN IN SAUDI ARABIA
He was referring to US President Joe Biden's recent trip to Saudi Arabia. One of the reasons for the visit was precisely the obtaining from Riyadh of a commitment to increase oil production, in order to increase the availability of barrels on the market and favor the lowering of fuel prices and the rate of inflation.
Biden's request was motivated by domestic political reasons: in November, US citizens will vote in important mid-term elections, and their main concern is the high price of gasoline.
Saudi Arabia is at the head of OPEC +, along with Russia.
THE BACKGROUND OF OPEC +
In previous summits, the members of OPEC + had agreed on far more substantial collective increases in production, of 430,000-650,000 barrels per day, even though it was difficult to respect them: several countries have in fact exhausted their production potential.
THE PRICE OF OIL
Today, futures contracts for Brent crude oil, the main reference quality on the market, have grown by around 3 dollars a barrel, reaching almost 102 dollars.
THE DIFFICULTIES OF PRODUCERS
In theory, by September OPEC + should have ended the production cut program launched in 2020 in response to the pandemic crisis, which had greatly reduced the demand for crude oil.
In June, however, the group was nearly 3 million barrels down from its daily output quota. The non-compliance with the targets is explained by the international sanctions imposed on some members (such as Russia and Iran) and by the low levels of investment in the oil & gas industry.
Analysts believe that only Saudi Arabia and the United Arab Emirates have spare capacity to allow for an increase in supply.
CAN SAUDI ARABIA DO MORE?
Other experts, however, argue that Riyadh cannot bring its output much higher than current volumes (about 10.6 million barrels per day): they estimate that it can reach 11-11.5 million at most, without drawing to its stocks.
Saudi authorities said state-owned Saudi Aramco will work to increase its production capacity to 13 million barrels per day, but only by 2027.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/energia/opec-aumento-petrolio-100mila-barili-settembre/ on Wed, 03 Aug 2022 14:12:03 +0000.