OPEC+ agrees to increase oil production by 100,000 barrels per day | CBC News

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The OPEC oil cartel and its allies decided on Wednesday to boost production in September at a much slower pace than in previous months at a time of high gasoline prices and unstable energy supplies exacerbated by the war Russia is waging in Ukraine.

OPEC, led by Saudi Arabia, and its allies, led by Russia, have said they will increase output to 100,000 barrels a day next month after raising it by 648,000 barrels a day in July and August. The group considered what effects staggering inflation and rising COVID-19 rates may have on global fuel demand in the fall.

It comes after US President Joe Biden visited Saudi Arabia last month, aiming to improve relations and encourage more oil production from the cartel to reduce high prices at the pump. The average price of gasoline in the US has fallen for 50 days in a row, according to price comparison website GasBuddy.

While a surge in oil production will push prices further down, the amount of new crude being released is less than US President Joe Biden expected after his recent visit to Saudi Arabia.

The Saudis refused to offer a commitment to pump more at that meeting, which is why the administration has been trying to source more barrels elsewhere ever since.

“The United States can look to other sources of oil, whether it’s Venezuela or Iran,” said Jacques Rousseau, managing director of Clearview Energy Partners.

Phillip Streible, chief market strategist at Blue Line Futures, told CBC News in an interview Wednesday that the OPEC news shows how quickly the oil market is turning.

“It’s a bit disappointing, an increase of 100,000 barrels, when they were looking at something bigger,” he said.

“Maybe OPEC is worried [about] the possibility of a recession.

United States trying to increase production

The Biden administration is also encouraging the US oil and gas industry to ramp up production.

“You’ve just seen the second-quarter results of some of these companies. They’re record profits,” Amos Hochstein, senior adviser on energy security at the State Department, said Wednesday on CNBC. “They should put those dollars back into production increases.”

The OPEC+ coalition had cut output during the pandemic as oil prices and demand plummeted, and those cuts are set to expire in September. The group has been gradually adding more oil and gas to the market as economies recover.

Some OPEC nations, such as Angola and Nigeria, have been producing less than the agreed amount. Saudi Arabia and the United Arab Emirates, on the other hand, have the capacity to increase production.

OPEC’s decision appears to be an attempt to appease countries that cannot produce more, Rousseau said.

“Every time you raise the target, there are countries that cannot participate,” he added. “If you only increase production by 100,000 barrels a day, that’s only a small part for everyone.”

High oil prices may persist

As a result, the amount of oil on the market may not meet demand, so high oil prices may persist for some time.

The price of oil rose sharply after Russia invaded Ukraine in February. It fell a bit since OPEC’s last meeting, but rose modestly on Wednesday.

A barrel of benchmark US crude was trading at just over US$94 on Wednesday, compared with more than US$105 a barrel a month ago. Brent crude, the international standard, was trading at just over $100 a barrel on Wednesday, also about $110 lower than a month ago.

Russia’s oil and natural gas exports to the world have fallen as many nations imposed sanctions or reduced purchases from the main supplier due to its invasion of Ukraine.

Russia has also reduced or cut off natural gas supplies to a dozen European countries, further driving up energy prices, reducing people’s purchasing power and threatening to spark a recession if nations can’t store enough gas. to spend the winter.

Change in OPEC leadership

It was the first official monthly meeting of the OPEC+ group since its leader, Mohammad Sanusi Barkindo, died at the age of 63 in his home country of Nigeria last month.

Haitham al-Ghais, a veteran of the Kuwait Petroleum Corporation, took over as OPEC secretary general this week.

In the US, a gallon of regular gasoline was selling for $4.16 on average on Wednesday.

That’s substantially lower than in June, when the national average topped $5 a gallon, but it’s still painfully high for many frontline workers and families and about 31 percent higher than what drivers were paying a year ago. .

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