The Organization of the Petroleum Exporting Countries (OPEC), together with a group of Russia-led oil producers, have announced that they have agreed to increase production gradually, but for now oppose US pressure to open the taps completely.
In July, the alliance between OPEC and the Russians agreed to gradually return millions of barrels a day that they had stopped producing at the beginning of the corona plague.
In an online meeting on Wednesday, the group decided to gradually move forward with this plan and increase production by 400,000 barrels per day by the end of 2022.
The move comes despite the White House saying last month that planned increased production is insufficient, urging OPEC to increase oil production faster as countries around the world try to recover from the plague.
The price of oil has remained stable in the meantime
Oil prices did not change much on Wednesday after the OPEC meeting, in line with analysts’ forecasts. US crude oil prices rose 0.1 percent to 68.59 a barrel. 71.59 per barrel, with both indices rising by about 40% this year.
OPEC representatives said it was too early to accelerate the return of more oil to the market because many countries are still struggling to dump the corona virus Delta strain and because competing manufacturers – like American oil shale producers – are preparing to produce more oil.
In its latest monthly market report, the International Energy Agency, a body examining energy use by heavy consumer countries, said the spread of the corona in many places recently – as well as changes in reported data – mean global oil demand forecasts have been “significantly lowered”. Will only arrive in 2022.
The services sector in China suffered a severe blow in August when a wave of infections in Corona caused many closures across the country. An index of Chinese non-manufacturing economic activity has shrunk for the first time since China’s recovery from the plague began more than a year ago.
In the U.S., coronary hospitalizations across the country rose last week and crossed the 10,000-case threshold for the second time since the outbreak of the plague. In some countries the burden on the health care system has been beyond its capacity.
Meanwhile, in its report, OPEC has significantly increased its production growth estimate for some competing oil producers for both this year and 2022. The cartel, headquartered in Vienna, has raised production growth by 840,000 barrels per day to 2.9 million barrels per day. The report noted the United States, whose annual growth reached 800,000 barrels per day.
OPEC is increasingly divided due to internal pressures regarding oil revenues. Some countries believe that maintaining the production limit can raise the price and increase sales. Other countries want to produce as much oil as possible no matter what the price.
For about a year and a half of the plague, OPEC and its Russian-led partnership, collectively known as OPEC +, ranged from a bearish position on oil demand to a bull position. When economies began to close earlier last year, Saudi Arabia and Russia ended a price war and persuaded the two groups of producers to cut crude oil production by 9.7 million barrels of crude oil a day – about 10% of demand in 2019.
Since then, both teams have gradually returned much of this production, but have done so unevenly. In July, a final agreement to increase oil production was delayed more than two weeks after the United Arab Emirates requested that the country’s productivity capacity within the group be reassessed. The Emirates wanted to pump more oil than was allocated to the country as part of its power as a component in the cartel, after investing large sums in its oil fields. Saudi Arabia, the de facto leader of OPEC, has reached a compromise with the United Arab Emirates and has finally agreed to increase the amount of oil it is allowed to produce.