Oil Rises on Report of OPEC Agreeing 100k Barrels/Day Output Increase
2022.08.03 15:17
By Geoffrey Smith
Investing.com — Crude oil prices rose on Wednesday as newswire reports suggested the world’s largest exporters would agree only a minimal increase to output from September.
Newswires reported that the Organization of Petroleum Exporting Countries’ ministerial body had proposed an increase of 100,000 barrels a day in quotas from next month. The action would – at least on paper – bring OPEC’s output target above where it was at the start of the pandemic. However, past underinvestment and other above-ground problems across many of the bloc’s members mean that it is actually producing well short of that target.
If OPEC – as is usual – distributes the quota increase among all its members, then the effective production increase will be much smaller than 100,000 b/d given the inability of many members to raise output in the short term. Recent public comments from ministers have suggested that only Saudi Arabia and the United Arab Emirates have any real room to raise output.
By 7:45 AM ET (1145 GMT), U.S. crude futures were up 0.9% at $95.22 a barrel, while Brent crude, the global benchmark, was up 0.8% at $101.33 a barrel.
“The market probably expected a bit more from OPEC as a bigger hike was on the table,” said Jens Naervig Pedersen, head of research at Danske Bank, via Twitter:TWTR).
Earlier on Wednesday, Kazakh Energy Minister Bolat Akchulakov had told reporters that an output was needed to restore the balance between supply and demand..
“We have always said that the preferred price corridor is $60-80 per barrel. Today the price is $100. So we might have to raise output to avoid overheating,” Akchulakov was quoted by Reuters as saying.
Kazakhstan is not a member of OPEC as such, but is one of the enlarged group of oil exporters known as OPEC+ that has coordinated output of the world’s most important commodity in recent years.
