The OPEC+ group is set to meet this Thursday to set production levels for production beginning in May – and with volatile oil prices well above $100 a barrel, the group’s decision could be its most influential yet.
Still, the market largely expects OPEC+ to stick to its planned 400,000 bpd increase in output. In the unlikely event that OPEC+ agrees to back its production cuts by more than the 400,000 bpd projected for May, the group is unlikely to meet such a new quota. In fact, it’s unlikely to ramp up production even to the 400,000 bpd most believe it will agree to, simply because it hasn’t reached current levels of quotas, let alone higher.
OPEC+ has shown they are uninterested in riding to the rescue of the market now struggling against high crude oil prices, which has impacted high gasoline prices – a worrying reality for the Biden administration. Despite pleas from the G7, the IEA, and particularly the UK and US, Saudi Arabia and the UAE – both aligned with Russia in the OPEC+ deal – the oil beggars have given the cold shoulder.
OPEC’s apparent reluctance to pump more isn’t unique to Russia. The United Arab Emirates has spoken out against those who have slandered the oil industry in its quest for energy transition in recent years and has chastised those who would now urge that industry to pump more. Some OPEC+ members have a history of going along with their chatter, even if it results in poor decision-making. Anyone older than 2 probably remembers the April 2020 oil price war, when Saudi Arabia and Russia began flooding the market with oil after the OPEC+ deal to cut production fell through as the coronavirus hit the Oil demand weakened and prices collapsed in a spectacular way.
The UAE ambassador to Washington clouded the outlook for the meeting earlier this month when he said the UAE favors output increases and would encourage OPEC to consider higher production levels. But shortly thereafter, the UAE espoused Russia’s crucial role in OPEC+, which many saw as an omen for things to come: OPEC+ will continue to rely on Russia’s blessing for all group decisions.
Also Read: Russia’s Oil Exports Plunged 26% Last Week
The latest sign from the UAE came today as UAE Energy Minister Suhail Al-Mazrouei said: “We will not add resources when the market is balanced and the resources are in the market.”
This echoes previous OPEC comments that claimed that today’s higher oil prices are not a matter of supply and demand fundamentals, but a matter of geopolitics.
It’s also unlikely that the UAE and Saudi Arabia will ramp up production without the group’s support – the only ones capable of doing so in terms of capacity – as it would violate the OPEC+ deal, for that she has worked so hard to maintain. It is widely believed that Russia would vocally oppose any such increase in legacy production beyond what the concern has already planned.
By Julianne Geiger for Oilprice.com
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