The OPEC+ group of oil exporters meet on Wednesday to discuss a further production increase, weeks after US President Joe Biden sought to persuade Saudi Arabia to increase production during a a controversial visit to the country.
The White House has pressured the oil cartel to step up production to rein in prices that have risen since Russia invaded Ukraine in late February.
But the group, which is led by Saudi Arabia and Russia, has stuck to modest increases so far.
The 13-member Organization of the Petroleum Exporting Countries, along with 10 allies including Russia, had cut production at the height of the Covid pandemic in 2020 after a slump in demand sent prices plummeting .
The group began ramping up production last year, agreeing to add 400,000 barrels per day to the market. It supported an increase of nearly 650,000 barrels per day in June, still not enough to trigger a sharp decline in oil prices.
Alliance production has returned to pre-virus levels, but only on paper, as a few members have struggled to meet their quotas.
All eyes will be on whether OPEC+ sticks to the same output policy or steps it up.
Biden’s Saudi trip
Biden traveled to Saudi Arabia in mid-July to meet Crown Prince Mohammed bin Salman despite promising to make the kingdom a “pariah” following the 2018 murder of journalist Jamal Khashoggi.
Part of the reason for the controversial trip was to convince Riyadh to continue to loosen production taps to stabilize the market and curb runaway inflation.
After his meetings with Saudi leaders in mid-July, Biden said he was “doing everything I can” to increase oil supplies, but added that concrete results would not be seen “for a few weeks.” – and we didn’t know what it could be. .
Wednesday’s meeting will reveal whether his efforts have been successful.
“The US administration seems to be anticipating good news but it’s unclear whether this is based on reassurances during Biden’s trip or not,” Craig Erlam, analyst at the OANDA trading platform, told AFP.
Stephen Innes, managing partner at SPI Asset Management, said it “wouldn’t be surprising to see the Saudis announce something that Biden could present as a victory to voters back home.”
According to London-based research institute Energy Aspects, OPEC+ could adjust its current deal in order to continue to increase crude production volumes.
However, analysts warn against any drastic increase.
OPEC+ must take into account that the interests of Russia, a key player in the alliance, are diametrically opposed to those of Washington.
“Saudi Arabia has to walk a fine line,” said Tamas Varga, analyst at PVM Energy.
Any decision on Wednesday will have to be unanimous, which can lead to a longer-than-normal meeting.
“Any new OPEC+ deal to boost supplies further is likely to be met with market skepticism, given the supply constraints already evident within the alliance,” said Han Tan, chief market analyst at Exinity.
The group will decide on exit policy under a new general secretary, Kuwaiti Haitham Al-Ghais, who took office on Monday following the death of Nigerian Mohammed Barkindo last month.
“I look forward to working with all of our member countries and our many partners around the world to ensure a sustainable and inclusive energy future that leaves no one behind,” Al-Ghais said in a statement.