Business

OPEC+ agrees to small production increase in Biden setback

  • OPEC to raise production target by 100,000 bpd from September
  • OPEC faces production challenges to meet existing targets
  • US seeks OPEC production boost to counter Russia
  • Biden trip, US arms sales did not convince

DUBAI/LONDON, Aug 3 (Reuters) – OPEC+ is set to raise its oil production target by 100,000 barrels a day, an amount analysts have called a setback for U.S. President Joe Biden after his trip to Saudi Arabia to asking the producer group leader to pump more to help the United States and the global economy.

The increase, equivalent to 0.1% of global demand, follows weeks of speculation that Biden’s Journey in the Middle East and Washington’s authorization of sales of missile defense systems to Riyadh and the United Arab Emirates will bring more oil to the world market.

“It’s so little that it doesn’t make sense. From a physical point of view, it’s a marginal blow. As a political gesture, it’s almost insulting,” said Raad Alkadiri, managing director energy, climate and sustainability at Eurasia Group.

Join now for FREE unlimited access to Reuters.com

The 100,000 bpd increase will be one of the smallest since OPEC quotas were introduced in 1982, according to OPEC data.

“It’s a smaller increase but still an increase,” Amos Hochstein, the US State Department’s senior energy security adviser, told CNN.

Hochstein said OPEC had already made larger increases in two of the previous three months.

“I think we’re much more focused on the bottom line, and that’s lowering the price of oil in the market,” Hochstein said, adding that U.S. gasoline prices had fallen well below $4. the gallon.

The Organization of the Petroleum Exporting Countries and its allies, led by Russia, a group known as OPEC+ which formed in 2017, had increased production by around 430,000 to 650,000 bpd per month , as they reversed record supply cuts introduced when pandemic shutdowns petered out. request.

They had, however, struggled to meet all of the targets as most members had exhausted their production potential after years of underinvestment in new capacity.

Combined with disruptions from Russia’s invasion of Ukraine in February, the lack of spare supply sent energy markets higher and fueled inflation.

REPAIRING LINKS

With U.S. inflation nearing 40-year highs and Biden’s approval rating under threat unless gas prices fall, the president visited Riyadh last month to re-establish ties with Saudi Arabia, which collapsed after the murder of journalist Jamal Khashoggi four years ago.

A 3D printed oil pump jack is seen in front of the OPEC logo in this illustration image, April 14, 2020. REUTERS/Dado Ruvic/File Photo

Saudi Arabia’s de facto ruler, Crown Prince Mohammed bin Salman, whom Western intelligence accuses of being behind Khashoggi’s murder – which he denies – also visited France last month in the as part of efforts to re-establish ties with the West.

On Tuesday, Washington approved $5.3 billion in sales of defensive missile systems to the United Arab Emirates and Saudi Arabia, but it has yet to reverse its ban on selling offensive weapons to Riyadh.

OPEC+, which next meets on Sept. 5, said in a statement that limited spare capacity requires it to be used with great caution in response to severe supply disruptions.

He also said a chronic lack of investment in the oil sector will impact adequate supply to meet growing demand beyond 2023.

Sources within OPEC+, speaking on condition of anonymity, also spoke of the need for cooperation with Russia as part of the broader OPEC+ group.

“(This move) is to calm the US down. And not too big to upset Russia,” an OPEC+ source said.

Benchmark Brent oil futures jumped around $2 a barrel after OPEC’s decision to trade near $101 a barrel.

Shortly after Russia’s invasion of Ukraine, which Moscow calls a “special military operation”, oil prices hit their highest level in 14 years.

In September, OPEC+ was supposed to have ended all record production cuts it had implemented in 2020 in response to the impact of the pandemic.

But in June, OPEC+ production was almost 3 million barrels per day below its quota because the sanctions imposed on some members and the low investments of others have crippled its ability to increase production.

Only Saudi Arabia and the United Arab Emirates would have spare capacity.

French President Emmanuel Macron said he had been told that Saudi Arabia and the United Arab Emirates had very limited ability to increase oil production.

Join now for FREE unlimited access to Reuters.com

Additional reporting by Alex Lawler, Rowena Edwards, Tamara Vaal and Mariya Gordeyeva; edited by Jason Neely, Emelia Sithole-Matarise, Barbara Lewis and Cynthia Osterman

Our standards: The Thomson Reuters Trust Principles.

Source

Related Articles

Leave a Reply

Your email address will not be published.

Back to top button