OPEC+ meets as U.S. considers massive release of oil reserves
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Saudi Energy Minister Prince Abdulaziz bin Salman said Tuesday that OPEC+ will keep politics out its decision-making processes.
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On Thursday, some of the most powerful oil producers in the world will gather to discuss the next phase for their output policies. This is following news that the U.S. may be considering drawing the greatest ever amount from its emergency oil supply.
OPEC+ is an important energy alliance that includes non-OPEC members and OPEC. It will be held via videoconference at 12:30 p.m. London Time.
Analysts in energy expect OPEC+ will stick to its strategy gradually reopening the tapsThe group has remained steadfastly resisting pressure from high-ranking consumers to increase oil production to help with economic recovery and to lower the price of oil.
After the unprovoked attack on Ukraine, the U.S. along with its international allies put an unprecedented economic barrage against Russia. Oil prices rose to an all-time record high.
Russia, it is certain the world’s third-largest oil producerIt is the third largest crude oil exporter to the global market, after the U.S.A and Saudi Arabia. It is also a major producer and exporter of natural gas.
Reuters reported that the U.S. has been considering a strategy to lower the price of crude by releasing upwards to 180million barrels from its strategic petroleum reserve. reported Wednesday, citing four unnamed sources. On Thursday, President Joe Biden will deliver remarks.
It would be the U.S.’s third attempt to tap its SPR within six months. This is also the second time since Russia invaded Ukraine in February.
Oil prices dropped sharplyFollow the news. International benchmark BrentOn Thursday, crude oil futures fell 4.3% to $108.58/barrel in London. The U.S. was up 3.3%. West Texas IntermediateFutures dropped 5.2%, to $101.83.
Supply shock
Edward Bell, the senior director for market economics at Emirates NBD said that he expected OPEC+ will stick with its current policy.
Bell stated that the forward curves are telling Bell that the market is not well-supplied and that there will be a significant supply shock in the future. Bell spoke to CNBC’s Capital Connection.
Bell expressed doubt that OPEC+ will be pushed to increase their production rate at a faster speed, given the fact that the U.S. could release as many as 180 million barrels via the SPR.
“This may just serve as the ammunition OPEC+ requires to state ‘Well look, there’s oil in the ground, and you can get it from your reserves. Similar messaging has been used by OPEC+ countries when requested for quicker increases in the past.
Mohammad Barkindo, Secretary General of OPEC has encouraged OPEC+ Ministers to “stay on the same course” and to be “vigilant and alert to changing market conditions.”
Aaron M. Sprecher – Bloomberg | Bloomberg | Getty Images
Mohammad Barkindo (OPEC Secretary-General) encouraged Russia members to participate in the Group’s Wednesday meeting.stay the course” ” and “be vigilant and alert to constantly-changing market conditions.”
OPEC+ has been working to unwind record-breaking supply cuts, which average around 10 million barrels per hour. This historic production reduction was implemented in April 2020 in order to assist the recovery of the energy market after the pandemic coronavirus sparked a decline in crude oil demand.
Since August 2013, the producer alliance has increased output targets by approximately 400,000 barrels each month. The monthly increase in output targets is expected to rise to 432,000 barrels/day starting May 1.
Act of despair
Saudi Energy Minister Prince Abdulaziz bin Salman saidTuesday, OPEC+ declared that politics would be excluded from its decisions in favour of “common good”, stabilizing energy costs.
Separately, United Arab Emirates Energy Minister Suhail Al Mazrouei told CNBC earlier this weekRussia was always a part OPEC+ despite the fact that many governments worldwide shun Russia for its involvement in the war in Ukraine.
Analyst at PVM Oil Associates Tamas Varga stated that the possibility of massive SPR releases was one option to supply extra supplies on short notice. Another option would be to return to the Iranian nuclear agreement.
Varga explained that “Presently, it seems like an understandable desperation with questionable outcomes.”
Leaders of G-7 countries called last week on OPEC for an increase in oil production to counter fears of shortages.
We call upon oil- and gas producers countries to be responsible and increase their international market deliveries. OPEC plays a crucial role. In a statement, the group announced that they will collaborate with all their partners to provide stable and sustainable energy supplies worldwide.
G-7 is a group that includes the U.K. and U.S. as well as Canada, Japan. Germany. France.
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