The OPEC+ group of oil exporters will set out a new strategy at its meeting on Wednesday, with all eyes on how they will respond to rising crude prices.
The 13 core members of OPEC, led by Saudi Arabia, and the 10 other OPEC+ countries – led by Russia – are at a crossroads.
After the drastic production cuts agreed in spring 2020 in response to the slump in demand caused by the corona pandemic, the member states of the alliance are producing again at pre-virus levels, at least on paper.
In normal times they might have stopped, but given the runaway prices and pressure from Washington, that scenario seems unlikely.
– Biden’s controversial trip –
US President Joe Biden traveled to Saudi Arabia in mid-July despite his promise to make the country a “pariah” following the 2018 assassination of journalist Jamal Khashoggi.
Part of the reason for the controversial trip was to convince Riyadh to further loosen production taps to stabilize the market and curb rampant inflation.
The meeting on Wednesday will show whether his efforts were successful.
“The US government appears to be expecting some good news, but it’s hard to say whether or not that’s based on assurances made during Biden’s trip,” Oanda analyst Craig Erlam told AFP.
“It wouldn’t be a surprise if the Saudis announced something that could trump Biden to voters back home as a win,” said Stephen Innes of SPI Asset Management.
– Skeptical market –
According to London-based research institute Energy Aspects, OPEC+ could adjust its current agreement to further increase crude production volumes.
However, analysts warn against expecting drastic increases.
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,” says Tamas Varga, an analyst at PVM Energy.
The task will be to allow the United States to save face while placating Moscow to ensure the stability of the alliance.
Any decision on Wednesday must be unanimous, which may result in a longer than normal session.
The videoconference meeting is scheduled to start around 13:00 GMT (or 15:00 at the cartel’s Vienna headquarters) on Wednesday.
“Any new OPEC+ deal aimed at boosting supplies further is likely to meet with market skepticism given that there are already supply shortages within the alliance,” says Exinity’s Han Tan.
The alliance is already regularly failing to meet production quotas already allocated and is struggling to return to pre-pandemic volumes.
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