Oil output rise hailed
KUWAIT CITY, May 7, (Agencies): Kuwait’s Deputy Prime Minister and Oil Minister Dr. Mohammad Al-Fares on Thursday praised OPEC+ countries’ recent joint decision to raise oil output by 432,000 barrels per day in June, saying it aims to “restore market balance through a monthly increase.”
The decison made after OPEC and non-OPEC ministers, including Kuwait, held talks virtually, comes with several factors taken into account, said Dr. Al-Fares, who is also State Minister for Cabinet Affairs.
These include disruptions to supply as a result of citywide lockdowns in China due to an increase in COVID infections, US interest rate hikes and a drop in the global growth and demand for oil due to a rise in commodity prices.
The recent agreement “enhances the security of supplies in the markets,” he explained, “which ensures market stability and achieves a balance between supply and demand.”
The price of Kuwaiti oil went up Friday by USD 1.22 to USD 117.14 per barrel from Thursday’s USD 115.92 per barrel, said the Kuwait Petroleum Corporation (KPC) Saturday.
The Brent crude and the West Texas Intermediate prices trended upward, increasing by USD 1.49 and USD 1.51 each, reaching respectively USD 112.39 per barrel and USD 109.77 pb.
OPEC and allied oil-producing countries decided Thursday to gradually increase the flows they send to the world, even as Europe’s plan to sanction Russian oil threatens to yank millions of barrels off a global market already thirsty for crude.
The cautious approach from the OPEC+ alliance - which includes non-member Russia - will exacerbate a global energy crunch, with prices expected to rise further for oil and the gasoline, diesel and aviation fuel made from it. Those higher prices will worsen global inflation, eating away at people’s ability to spend money that would otherwise support the economic recovery.
Oil prices have risen — more than 40% this year — as the boost in production remains smaller than what the U.S. and other oil-consuming countries are pressing for to ease high prices at the pump.
Bigger surges in oil prices have been held back by COVID-19 lockdowns in China cutting demand and the U.S. and other member countries of the International Energy Agency releasing oil from strategic reserves.
Still, analysts from Rystad Energy foresee the global market potentially losing up to 2 million barrels within six months if the 27 European Union countries approve a proposal to sanction Russian oil. Moscow is expected to see production fall after losing its biggest oil customer — Europe.
OPEC has made it clear to European officials that the oil cartel is not going to increase production to compensate for lost Russian oil. Some OPEC members already can’t meet their oil production quotas.
Russia is the world’s largest oil exporter with some 12% of global supply, and fears its oil and natural gas could be cut off have kept energy prices high. Before the invasion of Ukraine, Russian sent around 3.8 million barrels of oil per day to the European Union, where refineries turn it into gasoline and diesel fuel.
If the EU carries through on its plans to phase out crude imports in six months, Russia could try to sell those barrels to countries in Asia that are not participating in the boycott. But it might not be able to find customers for all of the oil displaced from Europe, even at tempting knockdown prices.