OPEC+ tipped to stay the course on oil output boost

Agence France-Presse

Posted at Jun 30 2022 07:19 PM

VIENNA, Austria - Major oil producers led by Saudi Arabia and Russia are expected to stick to a previously decided output boost on Thursday, despite calls for bigger increases to tame crude prices.

Russia's invasion of Ukraine has exacerbated concerns about oil supplies, sending prices to record highs this year.

Hard on the heels of an EU ban on Russian oil imports over the invasion, the OPEC+ cartel agreed at their last meeting in early June to open the taps wider than expected.

But prices continue to be high, and analysts say a respite is not in sight when the 23 members of OPEC+ meet via video conference in the early afternoon.

"We should expect a rubber stamp," said Jeffrey Halley, analyst at OANDA trading platform. "Given that OPEC+ can't even meet its present targets, and hasn't for a long time, I expect no bearish surprises."

The 13 members of OPEC, chaired by Saudi Arabia, and their 10 partners, led by Russia, drastically slashed output in 2020 as the coronavirus pandemic and the resulting lockdowns sent demand plummeting.

Since last year, they have been gradually increasing output again. In recent months, the United States and other top oil consumers urged OPEC+ to open the tabs more widely.

The group decided at its last meeting to add 648,000 barrels per day to the market in July, up from 432,000 in previous months.

Since Russia invaded Ukraine from February 24, the international benchmark, Brent North Sea Crude, has added around 17 percent, while the US benchmark WTI has jumped more than 18 percent.

Brent was trading at $115.81 a barrel on Thursday, while WTI was priced at $109.71.

Despite the pleas, the Vienna-based Organization of the Petroleum Exporting Countries -- which was set up to "ensure the stabilization of oil markets" -- has been sticking to its strategy.

Analysts have warned that only a recession may be able to bring down prices.

"The prices will likely push higher unless the recession fears take the upper hand," said Ipek Ozkardeskaya, an analyst at Swissquote Bank.

Several OPEC+ members have been failing to meet the output quotas, while Iran and Venezuela -- and now also Russia -- are blocked by sanctions. 

The United Arab Emirates said this week it was close to its oil output ceiling, ahead of a regional visit by US President Joe Biden, who is expected to lobby for increased production.

Biden will visit neighboring Saudi Arabia, the world's biggest oil exporter, as part of his tour next month, but analysts doubt it will convince OPEC+ to boost output.

On Monday, at the meeting of the G7 club of industrialized nations in Germany, French President Emmanuel Macron was caught on camera telling Biden details of a conversation with UAE leader Sheikh Mohamed bin Zayed Al-Nahyan.

According to Macron, Sheikh Mohamed said the UAE was at its "maximum" capacity and Saudi Arabia also faced a limit for raising production.