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OPEC+ sticks to modest oil output hike despite price rally

Published 05/04/2022, 04:24 AM
Updated 05/05/2022, 08:50 AM
© Reuters. FILE PHOTO: The logo of the Organization of the Petroleoum Exporting Countries (OPEC) is seen at OPEC's headquarters in Vienna, Austria June 19, 2018.   REUTERS/Leonhard Foeger

© Reuters. FILE PHOTO: The logo of the Organization of the Petroleoum Exporting Countries (OPEC) is seen at OPEC's headquarters in Vienna, Austria June 19, 2018. REUTERS/Leonhard Foeger

By Maha El Dahan, Ahmad Ghaddar and Alex Lawler

LONDON (Reuters) -OPEC+ agreed on Thursday to another modest monthly oil output increase, arguing that the producer group could not be blamed for disruptions to Russian supply and saying China's coronavirus lockdowns threatened the outlook for demand.

Ignoring calls from Western nations for accelerating output hikes, the group agreed to raise its June production target by 432,000 barrels per day, in line with an existing plan to unwind curbs made in 2020 when the COVID-19 pandemic hammered demand.

Thursday's meeting of OPEC+, made up of the Organization of Petroleum Exporting Countries and allies including Russia, was held amid surging oil prices.

In March, crude prices hit their highest since 2008 at more than $139 a barrel after Russia's invasion of Ukraine exacerbated supply concerns that were already fuelling a rally. Benchmark Brent crude traded above $111 on Thursday. [O/R]

The meeting also comes a day after the European Union proposed a phased embargo on Russian oil in its toughest measures yet over the war in Ukraine, which Moscow calls a "special military operation".

Two sources present at the meeting said delegates completely avoided any discussion about sanctions on Russia, wrapping up talks in near record time of just under 15 minutes.

The oil embargo will likely force Russia to reroute flows to Asia and cut production steeply, while the EU will compete for the remaining available supply. Both factors are likely to support elevated crude prices.

"OPEC+ continues to view this as a problem of the West’s own making and not a fundamental supply issue that it should respond to," said Callum Macpherson from Investec.

He said only Saudi Arabia and the United Arab Emirates had capacity to lift supply significantly, adding: "If they were to do so, the ensuing falling out with Russia could bring an end to OPEC+."

OPEC Secretary General Mohammad Barkindo said on Wednesday it was not possible for other producers to replace Russian exports of more than 7 million bpd. "The spare capacity just does not exist," he said.

© Reuters. FILE PHOTO: The logo of the Organization of the Petroleoum Exporting Countries (OPEC) is seen at OPEC's headquarters in Vienna, Austria June 19, 2018.   REUTERS/Leonhard Foeger

The United States has repeatedly asked OPEC to raise production, but the Saudi-led organisation has resisted the calls amid strained relations with Washington.

The West's energy watchdog, the International Energy Agency, agreed last month to release record volumes of oil stocks to help to cool prices and offset supply disruptions from Russia.

Latest comments

The west set the fire themselves, but blame others if others are not willing to put off the fire they set...what a ridiculous logic!
The west put set the fire themselves, but blame others if others are not willing to put off the they set....
I have to give it to these Saudis they are very wise
trump crime family taking bribes from dictatorships around the world, emboldening them for years to go against the west. now we see the results of trumps criminal neglect and mismanagement
it's what politicians do where have you been for thousands of years
Unlike the Biden crime family Jared wasnt in office…thats a crime as far as I know
strained relations with the saudis? I thought jared kushner was had resolved the relations with them. oh I forgot he resolved a problem that didnt exist, oh and netted a 2 billion dollar investment. grifters?
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