OPEC has agreed to increase oil production by 100,000 barrels per day.
OPEC, the biggest producers of oil in the world are set to slightly increase the production of oil, in a bid to ease the increasing prices of oil. The Organization of Petroleum Exporting Countries (OPEC), led by Saudi Arabia and includes countries like Russia, have decided to improve their output goal by 100,000 barrels in September, a figure which is projected to be a much slower pace compared to the previous months in a period of hiked gasoline prices and an inconsistent supply of energy aggravated by the war between Russia and Ukraine.
The group, which raised its production output to 648,000 per day for June and August, is said to be considering the staggering consequence that inflation and growing COVID-19 rates may have on the overall demand for fuel in the long run. This decision comes after the United States President, Joe Biden’s visit to Saudi Arabia, which was aimed at an improved relationship, as well as persuading the group to augment its production of oil to reduce the high prices at the pump. Gasbuddy, a price comparison website reported that the average price of gasoline in the United States have fallen for 50 consecutive days.
100,000 increase, an illustration of the oil market reacting to change.
Reports further point to the fact that the administration has been working towards sourcing more barrels from other sources, due to the blatant refusal of the Saudis to committedly increase their output at the meeting. Commenting on this recent development, Jacques Rousseau, the managing director at Clearview Energy Partners averred that the United States would probably seek for other sources of oil like Venezuela or Iran. Philip Streible, the chief marketing strategist at Blue Lane Futures also stated that the situation illustrated how much the oil market is reacting to a change, noting that the 100,000 increase was a tad disappointing, as they were looking to accrue a larger output. He added that the group was probably concerned about a possible recession.
The United State’s administration has presently urged its oil and gas industry to further increase its internal production. Amos Hochstein, a senior adviser for energy security in the state’s department noted that the second quarter of most companies have recorded immense profit, admonishing that these profits should be invested into ensuring a production increase. The OPEC group had extensively decreased their production output during the pandemic, when the demand and price of oil skyrocketed. While these cuts are due for expiration by September, the group is reported to have been gradually increasing oil and gas to the market, as the world economies gradually recover from the pandemic.
Imminent persistence in high price of oil due to demand outweighing supply.
Some of the countries under OPEC like Nigeria and Angola are said to have been recording less output than agreed upon but the United Arab Emirates and Saudi Arabia reportedly have enough means to increase their production. Jacques Rousseau again asserted that this decision was aimed at an attempt to appease the countries with less production output. According to him, while immensely increasing the output target, some countries would not be able to participate due to their low output. Thus, increasing the global output by 100,000 means just little pieces from everyone.
This situation means that the demand of oil might outweigh the market supply, which means that there might be a persistent high price of oil for a while. Prior, the price of oil globally recorded an outright rise when Russia invaded Ukraine and though it fell since OPEC’s last meeting, it recorded a modest rise again on Wednesday. Russia’s global oil exports have, due to the country’s invasion of Ukraine, rejected numerous countries’ imposed sanctions. Russia have also cut off supply of gas to a host of European countries since the war began, which have driven up the prices of energy. This has also threatened these countries with an imminent recession, if they cannot pile gas to last them through the winter.
Price of gasoline still considerably high for frontline workers and families.
The recent OPEC meeting was the first, since the death of the group’s leader, Mohammed Sanusi Barkindo, last month in his home country, Nigeria. However, Haitham al-Ghais of the Kuwait Petroleum Cooperation took over as OPEC’s secretary-general this week. In the United States, a gallon of gasoline sold for $4.16 on Wednesday and though substantially lower than in June, when the price surpassed $5 for a gallon, it is still considerably high for frontline workers and families, as well as drivers who were paying 31 percent less a year ago.
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