OPEC+ countries decided on Thursday to slow the pace of production increases, resisting calls from US President Joe Biden to further open the floodgates on oil in a bid to curb rising prices.
The Organization of Petroleum Exporting Countries (OPEC), led by Riyadh, and its allies led by Moscow, have agreed to an almost ridiculous increase in production for the month of September: specifically “100,000 barrels per day”, compared to about 432,000 and then 648,000. additional barrels set in previous months, the alliance announced in a post-meeting press release.
Prices rose immediately, “enough to disappoint the US president,” Tamas Varga, of PVM Energy, told AFP.
Oanda’s Edward Moya joked about “the smallest increase in OPEC+ history, which will not help overcome the current energy crisis.”
But others, like Stephen Brennock of PVM Energy, saw it as “a token move to appease” Joe Biden.
A much courted kingdom
The 23 partners had to decide on a new strategy this Wednesday, the current agreement coming to an end: on paper, they have returned to pre-pandemic production levels.
In the spring of 2020, the group had chosen to leave millions of barrels of oil underground, so as not to flood the market with crude that it could not absorb due to a collapse in demand.
Hoping to influence the decision, Joe Biden had visited Saudi Arabia for the first time as president in mid-July, away from his comments about a “rogue” state following the murder of dissident journalist Jamal Khashoggi.
His goal: convince the kingdom to pump more to curb rising fuel prices.
With its decision, OPEC+ shows that it stands united and forgives Russia, whose interests are diametrically opposed to those of Washington. In the press release he insists on “the importance of maintaining the essential consensus for the cohesion of the alliance.”
Last week, French President Emmanuel Macron was also on the move as he received Saudi Crown Prince Mohammed bin Salman.
After a meeting denounced by human rights defenders, the two leaders said they wanted to “intensify cooperation” to “mitigate the effects in Europe, the Middle East and the world” of the war in Ukraine.
The shadow of recession
Geopolitical issues aside, the recent relative decline in oil prices, against a backdrop of recession fears, may have led OPEC+ to play it safe.
From their highs last March to levels not seen since the 2008 financial crisis, the two benchmark crudes have lost more than 26%.
Especially since the cartel is taking advantage of the current situation. Saudi Arabia posted strong growth in the second quarter of 2022, fueled by black gold.
Another element is the low reserve capacities of the various members, with the exception of Saudi Arabia and the United Arab Emirates.
In fact, OPEC+ is struggling to respect the quotas shown, due to protracted political crises or even a lack of infrastructure investment and maintenance during the pandemic.
Russian production is also reduced, under the yoke of Western sanctions in connection with the invasion of Ukraine.
Source: BFM TV
