Major oil producers are expected Thursday to agree to continue raising output moderately despite pressure from the United States and other big consumers to open up the taps much more decisively amid soaring prices.
The 13 members of the Organization of Petroleum Exporting Countries and their 10 allies are scheduled to gather from 1300 GMT for their regular monthly meeting via videoconference, according to a source close to the group.
The powerful producers led by Saudi Arabia and Russia in the so-called OPEC+ grouping are expected to re-affirm a decision in July to modestly step up production after slashing it steeply last year as the pandemic hit global markets.
“While there is plenty of pressure on OPEC+ to increase output more aggressively, members continue to resist and instead seem to prefer to stick to their plan of easing cuts by 400,000 barrels per day per month,” ING analysts said in a note this week.
With prices for the benchmark WTI contract reaching $85 last week, the highest since 2014, US President Joe Biden appealed on the sidelines of the G20 summit in Rome over the weekend to OPEC to pump more.
“The idea that Russia and Saudi Arabia and other major producers are not going to pump more oil so people can have gasoline to get to and from work, for example, is not right,” he said.
Other oil-consuming nations, such as India and Japan, have also called for more output to lower prices.
Helima Croft of RBC Capital Markets said she would not rule out Saudi Arabia agreeing to a rise beyond 400,000 barrels per day “given the intensity of the White House pressure and from other key consuming countries like India”.
‘Operating on limit’
OPEC Secretary-General Mohammed Barkindo last week reiterated “the need to remain cautious and attentive to an ever-evolving market situation,” according to a statement.
While higher prices benefit producers in the form of increased revenues — particularly after the lean period of the coronavirus pandemic — there are concerns that they could stifle the fragile economic recovery and thus demand for oil.
There have also been question marks recently over the ability of OPEC+ members to drastically boost output.
“The consensus amongst investors is that OPEC+ will resist calls to speed up the pace of production increases because lots of the members are already operating on the limit of their production capacity,” Ricardo Evangelista of ActivTrades said.
Contrary to the normal trend of OPEC countries exceeding their production quotas, in recent months most member states have stuck to them or in some cases even fallen short.
This suggests that the group may not be able to rapidly increase production in the short term despite it having a current theoretical reserve of more than four million bpd in the ground.