OPEC+ agrees to small production increase as setback for Biden

  • OPEC raises 100,000 bpd output target from September
  • OPEC faces output problems to meet existing targets
  • US pushes for higher OPEC production to counter Russia
  • Biden trip, US arms sales failed to convince

DUBAI/LONDON, Aug. 3 (Reuters) – OPEC+ plans to raise its oil production target by 100,000 barrels per day, an amount analysts say was a setback for US President Joe Biden after his trip to Saudi Arabia to overthrow the leader of the producer group for more pumps to help the United States and the global economy.

The increase, equivalent to 0.1% of global demand, follows weeks of speculation that Biden’s trip to the Middle East and Washington’s approval of sales of missile defense systems to Riyadh and the United Arab Emirates will bring more oil to the global market. bring.

“It’s so little that it’s pointless. Physically, it’s a marginal blunder. As a political gesture, it’s almost insulting,” said Raad Alkadiri, director of energy, climate and sustainability at Eurasia Group.

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The 100,000 bpd increase will be one of the smallest since OPEC quotas were introduced in 1982, OPEC data shows.

“This is a smaller increase, but still an increase,” Amos Hochstein, the US State Department’s senior adviser on energy security, told CNN.

Hochstein said OPEC had already made bigger hikes in two of the previous three months.

“I think we’re focusing a lot more on the outcome, and that’s lowering the price of oil in the market,” Hochstein said, adding that US gasoline prices fell well below $4 a gallon.

The Organization of the Petroleum Exporting Countries and its allies, led by Russia, a group known as OPEC+ formed in 2017, had increased production by about 430,000-650,000 bpd per month as they reversed record supply cuts introduced. when pandemic lockdowns stopped demand for.

However, they struggled to meet full targets as most members have exhausted their production potential after years of underinvestment in new capacity.

Coupled with the disruption caused by the Russian invasion of Ukraine in February, the lack of reserve stocks has fueled energy markets and fueled inflation.

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With US inflation peaking at around 40 and Biden’s approval ratings under threat unless gasoline prices fall, the president traveled to Riyadh last month to mend ties with Saudi Arabia, which collapsed after the journalist’s murder. Jamal Khashoggi four years ago.

A 3D printed oil pump jack can be seen in front of the OPEC logo in this illustration photo, April 14, 2020. REUTERS/Dado Ruvic/File Photo

The de facto Saudi ruler, Crown Prince Mohammed bin Salman, who was accused by Western intelligence of being behind Khashoggi’s murder – which he denies – also traveled to France last month as part of efforts to mend ties with the West.

On Tuesday, Washington approved $5.3 billion sales of defensive missile systems to the UAE and Saudi Arabia, but has yet to reverse its ban on the sale of offensive weapons to Riyadh.

OPEC+, which will meet next September 5, said in a statement that limited reserve capacity requires it to be used with great caution in response to severe supply disruptions.

It also said a chronic lack of investment in the oil sector will affect sufficient supply to meet growing demand after 2023.

Sources within OPEC+, speaking on condition of anonymity, also mentioned the need for cooperation with Russia as part of the wider OPEC+ group.

“(This decision) is to calm the United States. And not too much to upset Russia,” said an OPEC+ source.

Benchmark Brent oil futures rose about $2 a barrel following OPEC’s decision to trade close to $101 a barrel.

Shortly after Russia’s invasion of Ukraine, dubbed a “special military operation” by Moscow, oil prices soared to their 14-year high.

OPEC+ was set to phase out all the record production cuts it had made in 2020 in response to the impact of the pandemic by September.

But in June, OPEC+ production was nearly 3 million barrels per day below quota as sanctions against some members and low investment by others crippled the ability to increase production.

Only Saudi Arabia and the UAE are expected to have some spare capacity.

French President Emmanuel Macron has said he was told Saudi Arabia and the UAE had very limited opportunities to increase oil production.

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Additional reporting by Alex Lawler, Rowena Edwards, Tamara Vaal and Mariya Gordeyeva; adaptation by Jason Neely, Emelia Sithole-Matarise, Barbara Lewis and Cynthia Osterman

Our Standards: The Thomson Reuters Trust Principles.

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