OPEC+ mulls production boost ahead of Russian oil curbs

OPEC+ mulls production boost ahead of Russian oil curbs

Saudi Arabia and other OPEC oil producers are discussing a production boost, group delegates said, a move that could help bridge a rift with the Biden administration and keep the flow going. of energy amid renewed attempts to blunt the Russian oil industry during the war in Ukraine.

A production increase of up to 500,000 barrels per day is currently under discussion for the December 4 OPEC+ meeting, delegates said. The move would come a day before the European Union is set to impose an embargo on Russian oil and wealthy Group of Seven countries are considering price caps on Russian crude sales, which could take market Moscow’s oil supplies.

After the Wall Street Journal and other news outlets reported on the talks on Monday, Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman denied the reports and said a production cut was possible at the place.

Saudi Energy Minister Abdulaziz bin Salman gestures during a panel as part of the Future Investment Initiative (FII) annual conference in the Saudi capital Riyadh on October 25, 2022. (DO NURELDINE/AFP via Getty Images/Getty Images)

Any increase in production would mark a partial reversal of a controversial decision last month to cut production by 2 million barrels a day at the latest meeting of the Organization of the Petroleum Exporting Countries and their Russian-led allies. , a group known collectively as OPEC+.

OIL MARKET FACES ‘CONSIDERABLE UNCERTAINTY’, OPEC WARNS

The White House said the production cut is undermining global efforts to blunt Russia’s war in Ukraine. It was also seen as a political slap in the face to President Biden, ahead of the midterm congressional elections at a time of high inflation. Relations between Saudi Arabia and the United States have hit a low point over disagreements over oil production this year, although US officials have said they are considering the December 4 OPEC+ meeting with some hope.

Talk of a production boost emerged after the Biden administration told a Federal Court judge that Saudi Crown Prince Mohammed bin Salman should be granted sovereign immunity from a US federal lawsuit linked to the brutal killing of the Saudi journalist Jamal Khashoggi. The immunity decision amounted to a concession to Prince Mohammed, cementing his position as the de facto ruler of the kingdom after the Biden administration tried for months to isolate him.

It’s an unusual time for OPEC+ to consider a production boost, as global oil prices have fallen more than 10% since the first week of November. Oil prices fell 5% after reports of the rise, then pared those losses after comments from Prince Abdulaziz. Brent crude was trading at $86.25 on Monday afternoon, down more than 1%.

Apparently, the delegates said, an increase in production would meet expectations that oil consumption will increase in winter, as it normally does. Oil demand is expected to increase by 1.69 million barrels per day to 101.3 million barrels per day in the first quarter of next year, compared to the average level for 2022.

OPEC and its allies say they have carefully studied G-7 plans to impose a price cap on Russian oil, privately conceding that they see such a move by crude consumers to control the market as a threatens. Russia has said it will not sell oil to any country participating in the price cap, which could lead to another effective cut in production from Moscow, one of the world’s top three oil producers.

OIL PRICES FALL TO TWO-MONTH LOW Amid NEW COVID CASES IN CHINA AND STRENGTHENED DOLLAR

Prince Abdulaziz said last month that the kingdom would “supply oil to anyone who needs it from us”, speaking in response to a question about impending Russian oil shortages. OPEC members have signaled to Western countries that they will accelerate if Russian production drops.

Talk of increased production creates a potential tussle between the two big OPEC+ producers, Saudi Arabia and Russia. The countries have an oil production alliance that industry officials from both countries have described as a marriage of convenience, and they have clashed before.

Saudi officials have insisted their decision to cut production last month was not intended to support Russia’s war in Ukraine. Instead, they say, the cut was intended to preempt the drop in demand for oil caused by a global economy showing signs of slowing.

QATAR SIGNS 27-YEAR GAS AGREEMENT WITH CHINA

Increasing oil production ahead of the price cap and EU embargo could give the Saudis another argument that they are acting in their own interests, not Russia’s.

Another factor driving talk of increasing production: Two big OPEC members, Iraq and the United Arab Emirates, want to pump more oil, OPEC delegates said. Both countries are pushing the oil-producing group to allow them a higher daily production cap, the delegates said, a change that, if granted, could mean more oil production.

Under OPEC’s complex quota system, the UAE is forced to keep crude production at a maximum of 3.018 million barrels per day. State-owned Abu Dhabi National Oil Co., which produces most of the UAE’s output, has a production capacity of 4.45 million barrels per day and plans to accelerate its target of reaching 5 million barrels of daily capacity by 2025. Abu Dhabi has long pushed for a higher OPEC quota, only to be rebuffed by the Saudis, OPEC delegates said.

Minister of Energy of the United Arab Emirates

UAE Energy Minister Suhail al-Mazrouei, middle, talks to Indian Minister of Petroleum and Natural Gas and Housing, Shri Hardeep Puri, right, during the opening ceremony of the Abu Dhabi International Petroleum Exhibition & Conference (AP Newsroom)

Last year, the country was the only one to resist a deal to increase crude production in OPEC+, saying it would only agree if it was allowed to increase its own production much more than others members. The public stalemate in OPEC was the first sign that the UAE has adopted a new strategy: sell as much crude as possible before demand dries up.

Earlier this month, Iraqi Prime Minister Mohammed Shia’ al-Sudani said his country, which is OPEC’s second-largest crude oil producer, would discuss a new quota with other members during its next meeting.

CLICK HERE TO GET THE FOX BUSINESS APP

A discussion on OPEC production quotas has been pending for months. The idea faces opposition from some OPEC countries because many cannot meet their current targets and watching other countries increase their quotas could cause political problems at the national level, the delegates said.

#OPEC #mulls #production #boost #ahead #Russian #oil #curbs

Leave a Comment

Your email address will not be published. Required fields are marked *