03 augustus 2022
17:33
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The oil cartel OPEC and its allies will only increase oil production by 100,000 barrels per day in September. That is a setback for US President Joe Biden.
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OPEC+ countries decided on Wednesday to significantly slow down the increase in oil production. They will pump only 100,000 barrels more per day in September, compared to an additional 648,000 barrels in July and August. The increase in production corresponds to 0.1 percent of global oil demand. Some analysts are calling this an insult to Joe Biden, Reuters news agency said.
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The US president traveled to Saudi Arabia in mid-July to ask for a significant increase in oil production. He wants to bring the oil price down. High energy prices since the Russian invasion of Ukraine have led to very high inflation rates and undermine Biden’s popularity.
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US President Joe Biden traveled to Saudi Arabia in mid-July to demand a significant increase in oil production.
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“We have to be very careful in using the very limited spare capacity,” OPEC+ said in a statement. Several countries of the group have produced less than agreed in recent months. Only Saudi Arabia and the United Arab Emirates can produce significantly more than now.
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recession
Another reason for OPEC+ to be cautious is the recent slump in oil prices. Growing fears of a recession have pushed oil prices down to around $100 a barrel, from $115 at the end of June. As a result, a large part of the increase since the start of the war in Ukraine has been reversed and prices at the pump in Belgium have fallen in recent days and weeks.
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OPEC+ does not want to offend Russia.
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OPEC+ also notes that consensus in the group is important. That is a signal that the group does not want to offend Moscow. Russian oil production is falling due to Western sanctions and the other countries of the group do not want to take advantage of this by producing more.
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Oil price reaction
The oil price rose after the OPEC+ decision by about 3 percent to more than $102. But the price later fell back below $100, partly because US oil inventories unexpectedly rose last week. The planned negotiations between the US and Iran are also weighing on the price, as they could lead to an increased supply of Iranian oil.
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Although the US government had expected more from OPEC+, it reacted relatively positively. “We’re not looking at barrel numbers, the question is whether prices will fall,” said Amos Hochstein, a senior State Department official. He referred to the ‘remarkable’ price drop in recent weeks, but added that the US wants a further fall in prices.
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