OPEC+ countries on Thursday decided to slow the pace of output growth, defying calls from US President Joe Biden to open oil floodgates further to curb soaring prices.
The Organization of the Petroleum Exporting Countries (OPEC), led by Riyadh, and its allies, led by Moscow, have agreed on an almost ridiculous increase in production for the month of September: namely “100,000 barrels a day” against about 432,000 and then 648,000 additional barrels added in September previous months, the alliance said in a statement after the meeting.
Prices rose immediately, “enough to disappoint the American president,” PVM Energy’s Tamas Varga told AFP.
Oanda’s Edward Moya quipped about “the smallest surge in OPEC+ history that won’t help overcome the current energy crisis.”
“The Biden administration will not be happy,” he said, predicting “a setback in US-Saudi Arabia relations.”
But others, like PVM Energy’s Stephen Brennock, saw it as “a symbolic measure of appeasement” from Joe Biden.
The 23 members were due to decide on a new strategy this Wednesday, the current agreement is expiring: on paper they have returned to pre-pandemic production levels.
In the spring of 2020, the company chose to keep millions of barrels of oil underground to avoid flooding the market with crude oil it couldn’t absorb due to a slump in demand.
Hoping to influence the decision, Joe Biden made his first visit to Saudi Arabia as US President in mid-July, a far cry from his statements about a “pariah” state after the assassination of dissident journalist Jamal Khashoggi.
His goal: to convince the kingdom to pump more to curb rising fuel prices.
With its decision, OPEC+ shows that it remains united and spares Russia, whose interests are diametrically opposed to those of Washington. In the press release, she emphasizes “the importance of maintaining the consensus that is essential for the cohesion of the alliance”.
Last week, French President Emmanuel Macron was also on his way to receive Saudi Crown Prince Mohammed bin Salman.
After a meeting denounced by human rights defenders, the two leaders said they wanted to “intensify cooperation” to “mitigate the impact of the war in Ukraine in Europe, the Middle East and the world.”
Geopolitical issues aside, the recent relative drop in oil prices amid recession fears may have prompted OPEC+ to play it safe.
Since peaking last March at levels not seen since the 2008 financial crisis, the two crude oil benchmarks are down more than 26%.
Especially since the cartel is taking advantage of the current situation. Saudi Arabia posted strong growth in the second quarter of 2022, boosted by black gold.
Another element is the low reserve capacity of the various members, with the exception of Saudi Arabia and the United Arab Emirates.
Indeed, OPEC+ is struggling to meet advertised quotas due to ongoing political crises or even the lack of investment and infrastructure maintenance during the pandemic.
Russian production is also being reduced under the yoke of Western sanctions related to the invasion of Ukraine.