The OPEC group of oil producing countries and its Russia-led allies agreed on another modest oil output increase on Thursday, ignoring Western pressure to significantly boost production as the Ukraine conflict has rocked prices.
The 13 members of the Saudi-led Organisation of the Petroleum Exporting Countries and 10 countries spearheaded by Russia backed an increase of 432,000 barrels per day in May, marginally higher than in previous months.
The group said in a statement following a ministerial meeting that the “continuing oil market fundamentals and the consensus on the outlook pointed to a well-balanced market”.It added that the “current volatility is not caused by fundamentals, but by ongoing geopolitical developments”.
The United States has urged OPEC+, as the alliance is known, to boost production as high energy prices have contributed to soaring inflation across the world, which has threatened to severely derail the recovery from the COVID pandemic. Crude prices have spiked over fears of a major supply shortfall after Moscow invaded Ukraine on February 24. Russia is the world’s second-biggest exporter of oil after Saudi Arabia.
High energy prices have contributed to soaring inflation across the world, which has threatened to severely derail the recovery from the COVID pandemic
The international benchmark contract, Brent North Sea crude, flirted with a record high in early March as it soared to almost $140 per barrel. It has retreated since then on hopes that Moscow and Kyiv could agree on a ceasefire, which would ease concerns over Russian supplies.
COVID lockdowns in China have also weighed on prices as the country is the world’s top crude consumer. Analysts said before the meeting that the fall in prices made it even less likely that OPEC+ would further boost output.
Oil prices tumbled again on Thursday on reports that the United States is considering tapping its reserves, but they remain above $100 per barrel. The White House is expected to announce a plan to release a million barrels a day for several months – totalling up to 180 million, according to Bloomberg News.
“If such a gigantic release of emergency reserves actually happens, the oil market would no longer be undersupplied in the second quarter,” Commerzbank analyst Carsten Fritsch said, adding that it would even be oversupplied in the third quarter. The US plan also made it less likely that OPEC+ would raise its output, analysts had said.
OPEC+ here ‘to stay’
The United States, Canada and Britain have decided to ban Russian oil and gas, but the European Union has avoided an embargo as countries such as Germany are highly dependent on imports from Russia. Berlin and the International Energy Agency, which advises developed countries, have also urged producers to boost production to bring relief to the market.
British Prime Minister Boris Johnson met with oil-rich Saudi Arabia’s de facto ruler Crown Prince Mohammed bin Salman to lobby for higher production earlier in March. But Gulf countries have resisted the pressure. The United Arab Emirates on Monday urged Western countries to be “reasonable” in their expectations and said the OPEC+ alliance was here “to stay”.
OPEC+ drastically cut production in 2020 as oil prices sank due to the pandemic, with the West Texas Intermediate contract, the US benchmark, even crashing into negative territory. It started to raise production again in August 2021 at its modest rate of 400,000 barrels per day, though some members have struggled to meet their quotas.