After months of waiting despite the surge in prices caused by the war in Ukraine, OPEC+ members on Thursday decided to shift gears and increase their oil production, responding to urgent demands from westerners.
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Officials from the thirteen members of the Organization of the Petroleum Exporting Countries (OPEC) and its ten partners (OPEC+) agreed that “July production will be adjusted upwards by 648,000 barrels per day,” compared to 432,000 barrels set in previous months , the alliance said in a statement after another whirlwind meeting.
The announcement on Monday by the 27 countries of the European Union of an embargo on most Russian oil has increased fears of shortages and visibly changed the situation for the cartel, underlining “the importance of stable and balanced markets”.
This is a turning point for OPEC+, which has been limited to modest increases in its quotas since spring 2021 to return to its pre-COVID-19 pandemic levels.
Even after Russia’s invasion of Ukraine, which heightened tensions in the market, the group had never deviated from its line.
This announcement pleased investors: Crude oil prices rose by almost 1%, the two crude oil benchmarks fluctuated around $116 a barrel.
A Wall Street Journal article had mentioned a possible offside for Russia hit by Western sanctions, but OPEC+ remained closed.
The agreed increase will be distributed proportionately to all members, with identical quotas for Moscow and Ryad, the two pillars of the alliance.
OPEC+, which pumps about half of the world’s oil, was formed in 2016 to adjust supply and regulate barrel prices.
However, some question the sustainability of the deal in the current circumstances.
“Russia has become the pariah,” claims Bjarne Schieldrop, an analyst at Seb, who sees “the apparent intensification of the diplomatic shuttle between the United States and Saudi Arabia” as a sign “that a switch may be near,” as the sanctions heap above on the Kremlin.
Following similar decisions by the United States and the United Kingdom, EU leaders reached an agreement on Monday that would cut their imports of Russian oil by about 90% by the end of the year.
Saudi Arabia has long been deaf to appeals.
Saudi Foreign Minister Prince Faisal bin Farhan reiterated at the recent World Economic Forum in Davos that “the kingdom has done what it can,” according to the business press.
“The situation is more complex than simply putting barrels on the market,” he stressed, while G7 members noted OPEC+’s “key role” in the face of “scarcer international markets.”
It is true that the Gulf economies are making hefty profits with a barrel well above 100 dollars: Saudi Arabia, for example, recorded its strongest growth in ten years in the first quarter.
Despite these more ambitious quotas, OPEC+ will not be able to replace all lost volumes from Russia as some of its members struggle to meet their targets, analysts warn.