OPEC ignores Biden and only opts for a symbolic increase in supply

Pressure from Western countries for the cartel of oil exporting countries (OPEC) and its allies (Russia) to increase production and thus lower inflation and energy costs had little effect.

Thomas Osborne
Thomas Osborne
04 August 2022 Thursday 01:55
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OPEC ignores Biden and only opts for a symbolic increase in supply

Pressure from Western countries for the cartel of oil exporting countries (OPEC) and its allies (Russia) to increase production and thus lower inflation and energy costs had little effect. In their meeting by videoconference this Wednesday in Vienna, the countries agreed on a symbolic increase of 100,000 barrels per day (bd) in September.

In percentage, it represents an increase of only 0.22% and is much lower than the previous ones (between 400,000 and 600,000 bpd). This is the smallest increase in production in the 62-year history of the cartel.

Formally, OPEC had already recovered in July the offer it had before the pandemic, although without achieving it due to the limitations of the productive capacity of many of its partners. Only Saudi Arabia and the United Arab Emirates still have the capacity to open the tap further. The rest is already pumping to the maximum of its technical possibilities.

The decision was adopted in the first monthly teleconference that the ministers of the sector of the 23 countries of the group celebrate after the trip in mid-July of the president of the United States, Joe Biden, to Saudi Arabia. Biden made that visit to the world's largest exporter of crude in the hope of achieving a substantial increase in oil supplies that would help lower prices, triggered by the war in Ukraine and Western sanctions on Russia.

France, the European Union (EU) and the International Energy Agency (IEA) have also asked OPEC to put more crude oil on international markets.

But "the very limited availability" of the capacity to pump more crude in a short period of time "demands that it be used with great caution," the ministers stressed in their final statement. They justify the fact of opting for a very symbolic increase to be able to respond, if necessary, to unforeseen supply cuts.

The organization also recalls that these years the chronic lack of investment has reduced excess capacity. The faucet, according to them, cannot be opened much further. Strategic reserves also "have reached their lowest levels in more than 30 years."

Prices are down nearly 30% from March highs and Brent, a benchmark in Europe, is trading above $97.