OPEC+ status quo unperturbed despite pressure

At the Zubair oil and gas site in Iraq's Basra province on May 9, 2018
At the Zubair oil and gas site in the Iraqi province of Basra on May 9, 2018 (HAIDAR MOHAMMED ALI / AFP)

OPEC+ oil-producing nations agreed on Thursday to a further modest opening of their black gold floodgates, ignoring calls to ease war-induced price pressure in Ukraine.

The thirteen members of the Organization of Petroleum Exporting Countries (OPEC), led by Riyadh, and their ten allies led by Moscow (OPEC+) agreed to “adjust total monthly production upwards of 432,000 barrels per day for the month of May.” the alliance said in a statement after a lightning meeting with a widely expected outcome.

The poster mentions an “adjustment” for technical reasons of the reference ceiling, previously 400,000 barrels.

With this decision, the alliance does not deviate from its line, which began in the spring of 2021 thanks to the recovery in demand, after the drastic cuts to face the onslaught of the Covid-19 pandemic.

“The key question is whether OPEC+ will be able to meet these production quotas in the coming months,” said Edward Gardner, an analyst at Capital Economics, as the cartel consistently fails to meet its targets.

– Unprecedented American initiative –

Analysts were expecting the status quo despite high expectations, with oil approaching its all-time highs reached during the 2008 financial crisis on March 7, topping $130 a barrel. Since then, prices have fallen from their highs.

US President Joe Biden ordered Thursday to extract a million barrels per day from strategic oil reserves for six months, an initiative “unprecedented” in US history to try to curb rising prices. at gas stations.

The market had retracted the rumors before the White House announcement and continued this trend after the formalization.

At around 16:00 GMT, North Sea Brent, Europe’s black gold benchmark, fell 4.59% to $108.24 a barrel, while US WTI fell 3.57% to $103. $.97.

“In total, up to 180 million barrels should be taken out of reserves,” explains Carsten Fritsch, an analyst at Commerzbank. Enough to allow the oil market to no longer be “undersupplied”, according to the expert.

Although others are more cautious about the impact of this measure: “Any coordinated use of strategic reserves will only be effective if the peace talks in the Ukraine war go in the right direction,” estimates Edward Moya, an analyst at Oanda.

If it works, this plan could allow for a complete paradigm shift, because the war has raised fears of disruptions to Russian oil deliveries and caused extreme fever in an already 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 stressed in the press release.

They remain, therefore, unmoved by the calls of the international community that have intensified, in particular after the decision of the United States and Great Britain to stop importing oil from Russia, the second largest oil exporter in the world after Saudi Arabia. Saudi. .

Two oil rigs off California, October 6, 2021
Two oil platforms off California, October 6, 2021 (Frederic J. BROWN / AFP / Files)

German Economy Minister Robert Habeck launched an “urgent appeal to exporting countries the next day to increase the level of production to ease the market.”

The International Energy Agency (IEA), which previously described the cartel’s wait-and-see decisions as “disappointing”, also urged OPEC+ to be “on the safe side”.

The 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 on 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 deal “didn’t exist, we wouldn’t be able to have stability in the energy market” and “price volatility would be even worse.”

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