OPEC+ agreed on Thursday to another modest monthly increase in oil output, arguing the group cannot be blamed for Russian supply disruptions and saying China’s coronavirus lockdowns threaten demand prospects.
Ignoring calls from Western countries to speed up output ramp-up, the group agreed to raise its production target for June by 432,000 barrels a day, in line with an ongoing plan to undo cuts made in 2020 when the Covid pandemic -19 hit the demand.
Thursday’s meeting of OPEC+, made up of the Organization of the Petroleum Exporting Countries and its allies including Russia, was held against a backdrop of rising oil prices.
In March, prices hit their highest level since 2008, at more than $139 a barrel, after the Russian invasion of Ukraine exacerbated supply concerns that were already fueling a rally.
So far this year, the barrel of Brent from the North Sea has gained 39.81%, while that of the American West Texas Intermediate (WTI) has risen 40.62 percent.
For its part, the Mexican export mix earns 46.14 dollars a barrel in 2022.
express meeting
The meeting also came a day after the European Union proposed a gradual embargo on Russian oil, in its toughest measures yet over the war in Ukraine, which Moscow calls a “special military operation.”
Two sources present at the meeting said delegates avoided any discussion of sanctions on Russia and wrapped up the talks in a near-record time of just under 15 minutes.
The oil embargo would force Russia to divert flows to Asia and drastically reduce production, while the EU will compete for the rest of the available supply. Both factors could favor the rise in prices.
“OPEC+ sees this as a problem created by the West and not as a fundamental supply issue that they need to answer,” said Investec’s Callum Macpherson.
He noted that only Saudi Arabia and the United Arab Emirates have the capacity to raise supply significantly, adding: “If they did, the ensuing break with Russia could put an end to OPEC+.”
Stephen Innes, an analyst at Spi Asset Management, considers that OPEC+’s prudence “is increasingly unbearable and contrary to the market regulation mission, which corresponds to this alliance forged in 2016.”
OPEC Secretary General Mohammad Barkindo said it is not possible for other producers to replace Russian exports of more than 7 million barrels a day. “The spare capacity just doesn’t exist,” he said.
The United States has repeatedly called on OPEC to increase production, but the Saudi-led organization has resisted the calls amid tense relations with Washington.
The International Energy Agency, the Western energy watchdog, agreed in April to release record volumes of crude reserves to help cool prices and offset supply disruptions from Russia.
lukewarm reaction
Oil rose slightly on Thursday after a rocky session marked by the European Union’s proposed embargo on Russian oil, the marginal opening of OPEC valves and the collapse of the New York Stock Exchange.
A barrel of North Sea Brent for July delivery ended up 0.69% at $110.90, while a barrel of WTI for June was up 0.41% at $108.26.
As of 7:30 p.m. Mexico City time, Petróleos Mexicanos had not updated the price of the Mexican blend on its official website.
OPEC + pumped 28.58 million barrels per day in April, according to a survey by the organization itself, which represents an increase of 40,000 barrels per day compared to March and does not reach the increase of 254,000 barrels per day foreseen in the supply agreement.
OPEC+ is slowly relaxing 2020 production cuts as demand recovers from the pandemic.
The previous deal called for a 400,000 barrels a day increase in April by all OPEC+ members, of which 254,000 are shared by the ten OPEC producers covered by the deal.
Output fell short of promised increases from October to March, with the exception of February, as many producers lack the capacity to extract more crude due to insufficient investment, a trend accelerated by the pandemic.
As a result, the ten members of OPEC are pumping far less than the deal envisioned. Compliance with cuts promised by OPEC was 164%, compared to 151% in March, according to a Reuters poll.
As if that were not enough, on Thursday, a US Senate committee approved a bill that could expose OPEC+ to collusion lawsuits over rising oil prices.
The bill No to Petroleum Production or Export Cartels (NOPEC) was approved by 17 votes in favor and 4 against in the Senate Judiciary Committee.
NOPEC would change US antitrust law to revoke the sovereign immunity that has long protected OPEC and its national oil companies from lawsuits.
Versions of the legislation have failed in Congress for more than 20 years, but lawmakers are increasingly concerned about rising inflation caused in part by gasoline prices, which briefly hit a record high of more than $4.30 a day. gallon this spring.
“I believe free and competitive markets are better for consumers than markets controlled by a cartel of state-owned oil companies. Competition is the very foundation of our economic system,” said Democratic Sen. Amy Klobuchar.