As expected, the cartel agreed to “adjust total monthly production upwards by 432,000 barrels per day for the month of May”, once morest 400,000 previously.
OPEC+ oil-producing nations agreed on Thursday to a modest further opening of their black-gold floodgates, ignoring calls to ease war-induced price pressure in Ukraine.
The thirteen members of the Organization of the Petroleum Exporting Countries (OPEC), led by Riyadh, and their ten allies led by Moscow (OPEC+) have agreed to “adjust upwards the total monthly production of 432,000 barrels per day for the month of May,” the alliance announced in a press release following a whirlwind meeting with a widely expected outcome.
The cartel mentions an “adjustment” for technical reasons of the reference ceiling, previously 400,000 barrels.
With this decision, the alliance is therefore not deviating from its line, initiated in the spring of 2021 thanks to the recovery in demand, following drastic cuts to deal with the shock of the COVID-19 pandemic.
“The key question is whether OPEC+ will be able to fully meet these production quotas in the coming months,” comments Edward Gardner, analyst for Capital Economics, with the cartel regularly failing to meet its targets.
Unprecedented American initiative
Analysts were expecting the status quo despite huge expectations, with oil on March 7 nearing its all-time price highs reached during the 2008 financial crisis, topping $130 a barrel. Since then, prices have fallen off their peaks.
United States President Joe Biden ordered on Thursday to draw one million barrels a day from strategic oil reserves for six months, an “unprecedented” initiative in American history to try to stem soaring prices. at the pump.
The market had pulled back on rumors before the White House announcement, and continued on this trend following the formalization.
Around 4:00 p.m. GMT, Brent from the North Sea, the benchmark for black gold in Europe, lost 4.59% to 108.24 dollars a barrel, when the American WTI yielded 3.57% to 103.97 dollars.
“In total, up to 180 million barrels should be taken out of reserves,” explains Carsten Fritsch, analyst for Commerzbank. Enough to allow the oil market to no longer be “under-supplied”, according to the expert.
Even if others are more cautious regarding the impact of this measure: “Any coordinated use of strategic reserves will only be effective if the peace talks in the war in Ukraine go in the right direction”, believes Edward Moya, analyst for Oanda.
If it works, this plan might allow a total paradigm shift, because the war has raised fears of disruptions in Russian oil deliveries and caused extreme feverishness in an already very tight market.
Calls from everywhere
But for OPEC+, which was created in 2016 with a view to market regulation, “the current volatility is not due to fundamentals, but to ongoing geopolitical developments”, its members underlined in the press release. .
They therefore remain impassive in the face of the calls of the international community which have intensified, in particular following the decision of the United States and Great Britain to stop importing oil from Russia, the second largest exporter of crude oil in the world behind Saudi Arabia.
German Economy Minister Robert Habeck launched an “urgent appeal to exporting countries the next day to increase the level of production to relieve the market”.
The International Energy Agency (IEA), which had previously described the cartel’s wait-and-see decisions as “disappointing”, also urged OPEC+ to be “on the safe side”.
Same message from the side of the G7 countries, while British Prime Minister Boris Johnson visited Riyadh.
Nothing helps: the Gulf countries are currently resisting Western demands.
The OPEC+ alliance, far from being destabilized by the conflict, appears more solid than ever. It is “here to stay,” Emirati Energy Minister Suhail al-Mazrouei said Monday, determined not to let “politics” undermine the organization.
Saudi Energy Minister Abdulaziz bin Salman also reiterated his commitment to OPEC + on Tuesday, arguing that if the agreement “did not exist, we might not have stability in the energy market” and “price volatility would be even worse.”
