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Oil Rises on Report of OPEC Agreeing to 100k Barrels/Day Output Increase

Commodities Aug 03, 2022 07:50AM ET
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© Reuters.

By Geoffrey Smith 

Investing.com -- Crude oil prices rose on Wednesday as newswire reports suggested the world's largest exporters would agree to only a minimal increase to output from September.

Newswires reported that the Organization of Petroleum Exporting Countries' ministerial body had proposed an increase of 100,000 barrels a day in quotas from next month. The action would - at least on paper - bring OPEC's output target above where it was at the start of the pandemic. However, past underinvestment and other above-ground problems across many of the bloc's members mean that it is actually producing well short of that target.

If OPEC - as is usual - distributes the quota increase among all its members, then the effective production increase will be much smaller than 100,000 b/d given the inability of many members to raise output in the short term. Recent public comments from ministers have suggested that only Saudi Arabia and the United Arab Emirates have any real room to raise output.

By 07:45 AM ET (1145 GMT), U.S. crude futures were up 0.9% at $95.22 a barrel, while Brent crude, the global benchmark, was up 0.8% at $101.33 a barrel.

“The market probably expected a bit more from OPEC as a bigger hike was on the table,” said Jens Naervig Pedersen, head of research at Danske Bank, via Twitter.

Earlier on Wednesday, Kazakh Energy Minister Bolat Akchulakov had told reporters that output was needed to restore the balance between supply and demand.

"We have always said that the preferred price corridor is $60-80 per barrel. Today the price is $100. So we might have to raise output to avoid overheating," Akchulakov was quoted by Reuters as saying.

Kazakhstan is not a member of OPEC as such, but is one of the enlarged group of oil exporters known as OPEC+ that has coordinated output of the world's most important commodity in recent years. 

Figures for June suggested that the OPEC+ group was producing some 2.84 million below its agreed level, according to a report by the Russian news agency Interfax. That reflects not only the chronic problems of OPEC members, but also the impact of western sanctions on Russia, the largest non-OPEC member in the group.

Russian data show that output has recovered somewhat from the initial sharp drop in response to the sanctions imposed after the Kremlin's invasion of Ukraine. However, figures for the first half of July suggested that the rebound was leveling out, while seaborne exports - which have the most direct impact on world oil prices - fell another 4%.

The shortfall of Russian supply has tightened world markets considerably, preventing a sharper fall in prices that might otherwise have happened due to the ongoing slowdown in the world economy. At the start of the year, OPEC analysts had estimated that global supply would outstrip demand by nearly 2 million barrels a day this year. That estimate is down to 800,000 b/d after the latest revisions to its estimates at the weekend, ahead of Wednesday's ministerial meeting.

Oil Rises on Report of OPEC Agreeing to 100k Barrels/Day Output Increase
 

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Comments (4)
Casador Del Oso
Casador Del Oso Aug 03, 2022 10:02AM ET
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more inflation headed our way
First Last
First Last Aug 03, 2022 10:02AM ET
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When has "more inflation" not been the norm?
Fahmi Yazit
Fahmi Yazit Aug 03, 2022 9:11AM ET
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Lame article...
Richie Berg
Richie Berg Aug 03, 2022 8:58AM ET
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100,000 b/d will fill one supermax in just two months.
First Last
First Last Aug 03, 2022 8:58AM ET
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That's NOT a type of oil tankers
William Smith
William Smith Aug 03, 2022 8:27AM ET
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When Trump was president OPEC did not control oil prices. But Biden changed all that, destroying America's oil independence and putting in play huge oil price increases long before Putin invaded Ukraine.
Shah Shawon
NinjaShah Aug 03, 2022 8:27AM ET
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i can't see any difference between Biden and a street dog.. everywhere barking and messing the world... i think Biden already messed the world more than the covid pandemic.. didn't see a worst president ever in American history...
Tony Huynh
Tony Huynh Aug 03, 2022 8:27AM ET
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lol OPEC control oil prices ever since they formed. You guys must have forgot the 2020 oil price war, that's one of the main reason oil fell into the negative lol.
First Last
First Last Aug 03, 2022 8:27AM ET
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Know the data before you speak.  US is still oil independent.  US crude oil production is at post Q1 2020 high and US nat gas production is at all time high.  Putin was restricting energy export months before he invaded.
 
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