Biden Mid-East Shuttle: OPEC+ Approves Tiny Oil-Output Hike
America’s Joe Biden mid East shuttle last month appear to have paid off by a little margin, enough to offer little comfort for consumers hit hard by soaring oil prices.
Reports yesterday said the 23-country cartel agreed to divide the 100,000 barrel-a-day increase between its members, but with only Saudi Arabia and the United Arab Emirates capable of boosting output, only a small amount of what is promised is likely to be delivered to market.
It is believed that in doing so, OPEC+ has responded to months of diplomatic efforts from US President Joe Biden with one of the smallest oil production increases in its history.
According to a report by Bloomberg, the cartel intends to add only 100,000 barrels a day of oil in September, giving a tight market extra supplies at a much slower pace than in recent months despite pressure from the White House to help cool prices.
The 23-nation alliance will divide that amount proportionally between members, and with only the Saudis and the United Arab Emirates able to bolster production, just a fraction of it is likely to be delivered.
For July and August, the group had pledged to add more than 600,000 barrels a day to the market.
Observers say the increase offers little respite for consumers suffering the inflationary squeeze of high oil prices. Brent crude erased earlier losses and was little changed at $100.59 a barrel as of 3:10 p.m. yesterday in London.
“From a global balance perspective, today’s minuscule quota increase — the smallest since 1986 in absolute terms and smallest ever in percentage terms — is noise,” said Bob McNally, president of Washington-based consultant Rapidan Energy Group and a former White House official.
“Though, if pump prices keep falling, the White House will likely claim credit.” Foreign ministers of member countries endorsed the proposal at an online meeting yesterday, according to a statement on the OPEC’s website. There were no discussions about whether the cartel and its allies would keep increasing production in subsequent months, delegates said. The group meets again on Sept. 5.
US officials has said, shortly after Biden’s trip to Saudi Arabia, that they were optimistic that Riyadh and Washington were on the same page toward reconciliation.
During his visit, when he greeted Crown Prince Mohammad bin Salman with a fist bump, the president said he expected further steps from the kingdom in terms of oil production. Late on Tuesday, the US approved the sale of $3.05 billion of weapons including Patriot missiles to the Middle East heavyweight.
OPEC+ had shown some goodwill toward consumers in recent months, fast-tracking the production increases in July and August that completed the reversal of their Covid-era curbs.
The Saudis ramped up output to 10.78 million barrels a day last month, according to a Bloomberg survey, a level pumped only on rare occasions.
“We saw that OPEC increased their supply in July and August, quite significantly, and now they’re continuing that,” Amos Hochstein, the state department’s senior adviser for global energy security, said in an interview in Washington.
“At the end of the day, we’re not looking at numbers of barrels, we’re looking at: Are oil prices coming down from their highs?”
US politics, Canada’s multiculturalism, South America’s geopolitical rise – we bring you the stories that matter. There’s been a “remarkable” drop in crude prices in recent months, but the Biden administration wants to see them go even lower, Hochstein said.
OPEC+ delegates said before the meeting that they saw no immediate need to replace supplies from coalition member Russia, which have proven robust despite sanctions over its invasion of Ukraine.