OPEC+ countries have decided to slow the pace of production increases, resisting calls from US President Joe Biden to open the oil floodgates further to try to stem the surge in prices.
The Organization of the Petroleum Exporting Countries (OPEC), led by Riyadh, and its allies led by Moscow have agreed on an almost ridiculous increase for the month of September: namely “100,000 barrels per day”, compared to the quantities of some 432,000 then 648,000 additional barrels set in previous months, the alliance announced after a ministerial meeting.
Edward Moya, an analyst at Oanda, quipped about “the smallest increase in the history of OPEC+, which will not help [la planète] overcome the current energy crisis.
“The Biden government will not be happy,” he told AFP, predicting “a setback in US-Saudi relations”. “A misery” too, according to Han Tan of Exinity, who noted that the increase was so small that it pushed crude prices into positive territory for a few hours.
But others, like Stephen Brennock of PVM Energy, saw it as “a symbolic measure to appease” Joe Biden.
The group’s decision reflects “the need to juggle between conflicting imperatives”, argues Matthew Holland, geopolitical analyst for the research institute Energy Aspects: not to pump too much to “support prices” in the face of macroeconomic concerns, but also “to take act of energy price inflation and the US call for higher production”.
A very courted kingdom
The 23 members of OPEC + had met by videoconference to take stock, the current agreement coming to an end: on paper, they have returned to pre-pandemic production levels. In the spring of 2020, the cartel chose to leave millions of barrels of oil underground so as not to flood the market with crude that it could not absorb due to a collapse in demand.
Hoping to influence the decision, Joe Biden had visited Saudi Arabia for the first time as President of the United States in mid-July, a visit that contrasted with his comments on a “pariah” state made after the assassination of dissident journalist Jamal Khashoggi. His goal: to convince the kingdom to pump more fuel to curb soaring prices.
Through its decision, OPEC+ demonstrates that it remains united and spares Russia, whose interests are diametrically opposed to those of Washington. In the press release, she insists on “the importance of maintaining the consensus essential to the cohesion of the alliance”.
Last week, the French President, Emmanuel Macron, was also at the maneuver by receiving the Saudi Crown Prince, Mohammed bin Salman. After a meeting denounced by human rights defenders, the two leaders said they wanted to “intensify cooperation” to “mitigate the effects in Europe, the Middle East and the world” of the war in Ukraine.
The shadow of recession
Beyond geopolitical issues, the recent relative decline in oil prices, against a backdrop of fears of recession, has visibly prompted OPEC+ not to take risks. Since their peaks last March, not seen since the 2008 financial crisis, the two crude benchmarks have lost more than 29%.
The Russian Deputy Prime Minister in charge of Energy, Alexandre Novak, thus justified “this prudent decision by the uncertainties weighing on the markets”. Asked about the Rossiya 24 television channel, he mentioned “the increase in COVID-19 cases” and “the disruption of transport and logistics chains”.
Another element is the low reserve capacities of the various members, with the exception of Saudi Arabia and the United Arab Emirates. The alliance also stressed on Wednesday that they were “extremely limited” due to “chronic underinvestment in the oil sector”, and that it was therefore necessary to act “with circumspection, in response to serious disruptions of the offer”.
OPEC + is struggling to meet the quotas displayed, due to prolonged political crises or the lack of investment and maintenance of infrastructure during the pandemic. Russian production, under the yoke of Western sanctions linked to the invasion of Ukraine, is also reduced