Opec+ keeps cautious oil production despite Biden pressure

·3 min read

THE Organization of the Petroleum Exporting Countries (Opec) and allied oil-producing countries rebuffed pressure from US President Joe Biden to pump significantly more oil and lower gasoline prices for American drivers, deciding Thursday, Nov. 4, 2021 to stick with their plan for cautious monthly increases even as prices surge and the global economy is thirsty for fuel.

The Opec+ alliance, made up of Opec members led by Saudi Arabia and non-members led by Russia, approved an increase in production of 400,000 barrels per day for the month of December at an online meeting.

That is in line with the group’s road map to add that amount of oil to the market every month into next year.

The plan is to open the petroleum taps bit by bit — even as oil prices have surged to seven-year highs — until deep production cuts made during the coronavirus pandemic are restored.

That hasn’t gone down well with Biden, who has made repeated calls to pump more oil.

The US used the Group of 20 summit last weekend in Rome to consult with other oil-consuming countries on how to exert influence over the producing countries and what they might do if the Saudis and Russians continue to hold back.

“Our view is that the global recovery should not be imperiled by a mismatch between supply and demand,” a White House National Security Council statement said Thursday. “Opec+ seems unwilling to use the capacity and power it has now at this critical moment of global recovery for countries around the world.”

Responsible regulator

Saudi Energy Minister Prince Abdulaziz bin Salman said member countries were “underscoring their commitment to market stability.”

He said Opec+ was serving as a responsible market “regulator,” comparing the relative stability of the oil market to the wild swings in prices for natural gas, which have risen more than five times what they were at the start of the year amid a global fossil fuel crunch.

“Markets need to be regulated, or things may go astray as we have been seeing over the past four months,” he said at a news conference.

The caution from Opec+ means higher prices worldwide and more revenue for producing countries.

Slower increases also mean less risk of increasing production too fast and sending prices suddenly lower as the group braces for the possibility of more economic turbulence from Covid-19 outbreaks this winter or from supply chain backups, labor shortages and rising consumer prices that have threatened the global recovery.

Russian Deputy Prime Minister Alexander Novak said the alliance considered “the pluses and minuses,” including higher reserves in some countries, the seasonal drop in demand in winter and the impact of the delta variant.

Suhail Almazrouei, energy minister of the United Arab Emirates, said oil markets were expected to be in surplus by early next year and that the gradual road map “is taking us smoothly to that position” where supply and demand would “rebalance in the first and second quarters.”

US oil prices eased somewhat this week after hitting their highest level since 2014.

Oil traded up 0.6 percent at US$81.39 per barrel, on the New York Mercantile Exchange after the Opec+ decision, down from its recent peak of over $85 last week.

International benchmark Brent crude traded at $82.74 Thursday, down from over $86 last week. Oil prices fell ahead of the meeting on speculation that the US possibly in coordination with other countries, could try to quell the recent price rally by releasing crude from strategic reserves.(AP)

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