OPEC+ agrees tiny output rise in setback for Biden
VIENNA/DUBAI/LONDON — The Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, announced on Wednesday a slight production boost in September despite calls for speedier increases to rein in high crude prices.
Analysts said the amount of increase was a setback to US President Joe Biden after his trip to Saudi Arabia to ask the producer group’s leader to pump more to help the United States and the global economy.
The cartel decided to raise production by 100,000 barrels per day for September, much lower than previous increases, according to a statement issued after a ministerial videoconference.
It warned that insufficient investment into the oil industry’s upstream sector will “impact the availability of adequate supply in a timely manner to meet growing demand beyond 2023”.
The increase, equivalent to 0.1 percent of global demand, follows weeks of speculation that Biden’s trip to the Middle East and the United Arab Emirates will bring more oil to the world market.
“That is so little as to be meaningless. From a physical standpoint, it is a marginal blip. As a political gesture, it is almost insulting,” Raad Alkadiri, managing director for energy, climate and sustainability at Eurasia Group, told Reuters.
“The smallest increase in OPEC+ history will do little to help the ongoing global energy crisis,” Edward Moya, analyst at OANDA trading platform, told Agence France-Presse. “The Biden administration will not be happy and this will be a setback in improving US-Saudi relations.”
The increase of 100,000 bpd will be one of the smallest since OPEC quotas were introduced in 1982, OPEC data shows.
Russia’s deputy prime minister in charge of energy, Alexander Novak, said OPEC+ made a “cautious” decision due to “uncertainties in the market”.
“This is a smaller increase, but an increase nonetheless,” Amos Hochstein, senior US State Department adviser for energy security, told CNN.
Venezuela reaffirmed its commitment to strengthening the cooperation mechanisms of OPEC+, said its Oil Minister Tareck El Aissami on Wednesday.
Iraqi Oil Minister Ihsan Abdul Jabbar said the OPEC+ decision seeks to achieve a balance between supply and demand in global oil markets.
Pandemic impact
OPEC+ slashed oil production massively in 2020 when the COVID19 pandemic hammered demand. Since July last year, the group has been unwinding output cuts by raising production from 400,000 to 648,000 bpd every month.
In theory, the alliance’s total output is supposed to have returned to pre-pandemic levels by the end of August, but some of its members have reportedly been struggling to meet their quotas. OPEC’s most recent monthly report showed that Angola and Nigeria fell significantly behind their production targets in June.
OPEC+ has so far resisted the pressure from the US and other major oil consumers, who have been pressing the group for months to open taps wider to tame sky-high crude prices and soaring inflation.
Biden visited Saudi Arabia in mid-July in an effort to urge the de facto leader of OPEC to pump more oil, but Riyadh has repeatedly stressed its commitment to the OPEC+ alliance.
The next OPEC+ ministerial meeting will convene on Sept 5.