The OPEC+ oil cartel has agreed to a tiny increase in production, an amount analysts say will disappoint US President Joe Biden after he personally lobbied Saudi leaders for help to tame soaring energy prices.
The cartel led by Saudi Arabia and Russia decided to raise production by 100,000 barrels per day for September, much lower than previous increases, according to a statement issued after a ministerial videoconference.
Oil prices seesawed following the announcement, rising before falling more than two percent in afternoon trading, with the main international contract, Brent, slipping under $100 per barrel. Traders were also reacting to data showing US crude inventories had unexpectedly risen last week.
“The smallest increase in OPEC+ history will do little to help the ongoing global energy crisis,” Edward Moya, analyst at OANDA trading platform, told AFP.
“The Biden administration will not be happy and this will be a setback in improving US-Saudi relations,” said Moya, who expects oil prices to remain stuck around $100.
With energy prices soaring following Russia’s war in Ukraine, Biden made a controversial trip to Saudi Arabia in July in part to convince the kingdom to loosen the production taps to stabilise the market and curb rampant inflation.
Biden said after his meetings with Saudi officials that he was “doing all I can” to increase the oil supply.
“A 100,000 barrel per day output hike is a pittance,” said Han Tan, chief market analyst at Exinity.
“It’s likely that the Biden administration will feel let down, considering its overtures to Saudi Arabia have yielded scant results, at least this time around,” Tan said.
Saudi Arabia faced a balancing act between its old ally, Washington, and its OPEC+ partner Moscow, which has been hit by Western sanctions over the Ukraine invasion.
“The increase was a token gesture to appease US President Joe Biden,” said Stephen Brennock, analyst at PVM Energy.
The OPEC+ statement emphasised the “value and importance of maintaining consensus as essential to the cohesion” of the group, which includes the 13-member Organization of the Petroleum Exporting Countries and 10 allies including Russia.
Russia’s deputy prime minister in charge of energy, Alexander Novak, said OPEC+ made a “cautious” decision due to “uncertainties in the market”.
He noted that Covid cases are rising.
“We see uncertainties associated with the disruption of transport and logistics chains due to restrictions being introduced, including for Russian oil and oil products,” Novak said.
Peter McNally, analyst at research firm Third Bridge, said OPEC+ was expected “to take more of a wait-and-see approach to adding material amounts of supply in the months ahead for several reasons”.
“The basis for the restraint are uncertainty around the future of Russian production and the cloudier outlook in demand,” he said, pointing to China’s Covid lockdowns and high fuel prices in the United States affecting demand.
Biden is not the only Western leader to have lobbied bin Salman.
French President Emmanuel Macron hosted him last week in Paris, with Macron’s office saying the two leaders agreed to work “to ease the effects” of the Ukraine war.
Before announcing he would resign as British prime minister, Boris Johnson had also visited bin Salman in Riyadh in March to plead for higher oil production.
After cutting production in 2020 in response to falling prices during the Covid pandemic, OPEC+ agreed to raise its quotas last year as demand rebounded.
OPEC+ began to add around 400,000 barrels per day to the market last year, renewing the policy every month until June. It upped production by almost 650,000 bpd in July and August.
Its output is supposed to have returned to pre-Covid levels after cuts totalling 9.7 million bpd — but only on paper, as some members of the 23-nation group have struggled to meet their quotas.