by Ameline Burkel
France media agency
London, United Kingdom (AFP) – The OPEC+ oil exporting group is set to outline a new strategy at its meeting on Wednesday, with all eyes on how it will react to rising crude prices.
The 13 core OPEC countries, led by Saudi Arabia, and the other 10 OPEC+ countries – led by Russia – find themselves at a crossroads.
After the big production cuts agreed in the spring of 2020 in response to lower demand caused by the coronavirus pandemic, coalition member states are once again beginning to produce at pre-virus levels – at least on paper.
In normal times they would have stopped there but facing runaway prices and pressure from Washington, this scenario is seen as unlikely.
– Biden’s controversial trip –
US President Joe Biden traveled to Saudi Arabia in mid-July despite promising to make the country a “pariah” in the wake of the 2018 murder of journalist Jamal Khashoggi.
Part of the reason for the controversial trip was to persuade Riyadh to continue to loosen the production taps to stabilize the market and curb rampant inflation.
Wednesday’s meeting will reveal whether his efforts have been successful.
“The US administration seems to be expecting some good news, but it’s hard to know if that’s based on confirmations during Biden’s trip or not,” analyst Craig Erlam told AFP.
“It wouldn’t be surprising to see the Saudis announce something Biden could promote as a win for voters at home,” according to Stephen Innes of SPI Asset Management.
– Skeptical market –
According to the London-based research institute Energy Aspects, OPEC + could adjust its existing agreement in order to continue to increase crude oil production volumes.
However, analysts caution to expect any significant increases.
OPEC + has to take into account the fact that the interests of Russia – the main 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 would be to allow the United States to save face while also appeasing Moscow in order to ensure the stability of the alliance.
Any decision on Wednesday must be unanimous, which could lead to a longer-than-usual meeting.
The video meeting is scheduled to begin around 1300 GMT on Wednesday (or 3 pm at the cartel’s headquarters in Vienna).
“Any new OPEC+ agreement aimed at increasing supply is likely to be met with skepticism in the market, given the already evident supply constraints within the alliance,” says Exinity’s Han Tan.
The alliance is already regularly failing to meet production quotas already allocated and struggling to return to pre-pandemic volumes.