OPEC+ walks the “thin line” between the US and Russia

(FILES) Bahraini Minister of Oil and Gas Sheikh Mohammed bin Khalifa bin Ahmed Al Khalifa (right), Iraqi Oil Minister Ihsan Abdul-Jabbar Ismail (center) and Saudi Energy Minister Abdulaziz bin Salman bin Abdulaziz Al Saud (left) arrive at 29 th Annual Middle East Oil and Gas Conference in Manama, Bahrain, May 16, 2022. (Photo by Mazen Mahdi/AFP)

Emeline Burkel
Agence France-Presse

LONDON, United Kingdom (AFP) — The OPEC+ oil exporting group is set to craft a new strategy at a meeting on Wednesday, with a focus on how they will respond to skyrocketing oil prices.

The 13 main members of OPEC, led by Saudi Arabia, and 10 other OPEC+ countries, including Russia, are at a crossroads.

After the drastic production cuts they agreed to in the spring of 2020 in response to a drop in demand caused by the coronavirus pandemic, the alliance’s member states are again producing at pre-virus levels – at least on paper.

In normal times, they might have stopped there, but with prices soaring and pressure from Washington, this scenario is seen as unlikely.

— Biden’s Controversial Journey —
US President Joe Biden visited Saudi Arabia in mid-July despite his pledge to turn the country into a “rogue state” following the 2018 assassination of journalist Jamal Khashoggi.

One of the reasons for the scandalous trip was to convince Riyadh to keep loosening production taps in order to stabilize the market and curb runaway inflation.

Wednesday’s meeting will show whether his efforts have been successful.

“The US administration appears to be expecting good news, but it’s hard to tell if that’s based on assurances during Biden’s trip or not,” Oanda analyst Craig Earlam told AFP.

“It wouldn’t be a surprise if the Saudis announced something that Biden could be selling to voters at home as a win,” Stephen Innes of SPI Asset Management said.

– Skeptical Market –
According to London-based research institute Energy Aspects, OPEC+ may adjust its current agreement to continue increasing oil production.

However, analysts warn against a sharp rise.

OPEC+ has to take into account the fact that the interests of Russia, a key 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 challenge will be to allow the United States to save face and also appease Moscow to ensure the stability of the alliance.

Any decision on Wednesday must be unanimous, which could lead to a longer meeting than usual.

The videoconference is due to start around 13:00 GMT on Wednesday (or 15:00 at the cartel’s headquarters in Vienna).

“Any new OPEC+ deal to further increase supply is likely to be met with skepticism by the market, given the already apparent supply constraints within the alliance,” says Exinity’s Han Tan.

The Alliance is already regularly falling short of already allocated production quotas and is struggling to return to pre-pandemic volumes.

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