Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

OPEC+ brings forward oil output rises as Biden's Saudi visit looms

Commodities Jun 02, 2022 05:21PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© 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/File Photo

By Maha El Dahan, Rowena Edwards and Aziz El Yaakoubi

DUBAI/LONDON/RIYADH (Reuters) -Saudi Arabia and other OPEC+ states agreed to bring forward oil production rises to offset Russian output losses to ease surging oil prices and inflation and smooth the way for an ice-breaking visit to Riyadh by U.S. President Joe Biden.

OPEC+ said it had agreed to boost output by 648,000 barrels per day (bpd) in July - or 0.7% of global demand - and a similar amount in August versus the initial plan to add 432,000 bpd a month over three months until September.

The move will be seen as a sign of willingness by Saudi Arabia and other OPEC Gulf nations to pump more after months of pressure from the West to address global energy shortages worsened by Western sanctions on Russia.

Oil rose on the news towards $117 a barrel as analysts said the real production boost will be insignificant as most OPEC members except for Saudi Arabia and the United Arab Emirates are already pumping at capacity. Earlier this year, oil came close to an all-time peak of $147 hit in 2008.

OPEC+, an alliance of the Organization of the Petroleum Exporting Countries and other producing nations, includes Russia, whose output has fallen by about 1 million bpd following Western sanctions on Moscow over its invasion of Ukraine.

U.S. diplomats have worked for weeks on organising Biden's first visit to Riyadh after two years of strained relations because of disagreements over human rights, the war in Yemen and U.S. weapons supplies to the kingdom.

U.S. intelligence has accused Saudi Crown Prince Mohammed bin Salman, known as MbS, of approving the 2018 killing of Saudi journalist Jamal Khashoggi, a charge the prince denies.

Saudi Arabia and its neighbour the United Arab Emirates have been frustrated at the Biden administration's opposition to the military campaign in Yemen and failure to address Gulf concerns about Iran's missile programme and its regional proxies.

With the Ukraine war adding to a tight crude market, the U.S. administration has sought more supplies from Gulf allies such as Saudi Arabia, as well as from Iran whose output has been restricted by U.S. sanctions that could be lifted if a nuclear deal is reached, and Venezuela, also under U.S. sanctions.

BIDEN'S APPROVAL RATINGS

Rocketing gasoline prices have driven U.S. inflation to a 40-year high, hitting Biden's approval ratings as he approaches mid-term elections. Biden has refused so far to deal with MbS as Saudi Arabia's de-facto ruler.

A source briefed on the matter said Washington wanted clarity on oil output plans before a potential Biden visit for a summit with Gulf Arab leaders, including MbS, in Riyadh.

A second source familiar with discussions about Biden's visit said the issue was not only tied to oil production, but also to Gulf security issues and human rights. The source said both Riyadh and Washington had been showing more readiness to listen to the other's concerns.

The White House said it welcomed Thursday's decision and recognised the role of Saudi Arabia in achieving OPEC+ consensus.

Western sanctions could reduce production from Russia, the world's second largest oil exporter, by as much as 2 million to 3 million bpd, according to a range of industry estimates.

Russia was already producing below its OPEC+ target of 10.44 million bpd in April with output running at about 9.3 million bpd.

A Western diplomat said Russia might be ready to agree to other members of OPEC+ to fill a gap in its output to preserve unity in the group and maintain support from the Gulf, which has tended to take a neutral stance over the Ukraine war.

OPEC+ agreed to cut output by a record amount in 2020 when the pandemic hammered demand. By September, when the deal expires, the group will have limited spare capacity to lift output further.

Saudi Arabia is producing 10.5 million bpd and has rarely tested sustained production levels above 11 million bpd. Riyadh says it is working on boosting its nameplate capacity to 13.4 million bpd from the current 12.4 million by 2027.

The only other OPEC state with significant ability to produce more oil is the UAE, although OPEC is estimated to have less than 2 million bpd of spare capacity in total.

Amrita Sen, co-founder of Energy Apsects think-tank, said, the real production boost over July-August would amount to around 560,000 bpd - compared to the scheduled 1.3 million bpd - because most members have already maxed out their production.

"These volumes will barely make a dent to the deficit in the market," she said.

OPEC+ brings forward oil output rises as Biden's Saudi visit looms
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (3)
Val Lange
Val Lange Jun 02, 2022 2:58PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Bull market is back on cheaper oil
jason xx
jason xx Jun 02, 2022 10:34AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
These articles are all over the place. What is with all the pessimistic opinion comments saying boosting production won't do anything?
gab nea
gab nea Jun 02, 2022 5:13AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
so its russia and opec causing high oil prices. Republicans say it's biden. why are Republicans on the side of putin I do not comprehend. traitors?
jason xx
jason xx Jun 02, 2022 5:13AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Because traitor trump would have surrendered Ukraine to putin on day one then oil would still be cheap.
First Last
First Last Jun 02, 2022 5:13AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Because the Republican Party has become a satellite party of Putin's United Russia Party.
First Last
First Last Jun 02, 2022 5:13AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Republicans haven't blamed energy inflation on Trump for withdrawing from the Iran nuclear deal.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email