OPEC+ ratifies 100,000 b/d crude oil production quota hike for Sep: delegates


OPEC and its allies will implement a modest 100,000 b/d rise in crude production quotas for September, in a slight nod to US President Joe Biden and other leaders that had pressed the group for more supplies to tackle high oil prices.

The increased quotas, approved by the OPEC+ alliance at a virtual meeting Aug. 3, are distributed among the 23 countries pro rata, delegates told S&P Global Commodity Insights.

In practice, however, with every member of the alliance incapable of sustainably raising production, except for Saudi Arabia and the UAE, the actual supply increase will be much smaller.

S&P Global calculates that the decision will effectively result in a 34,000 b/d rise — about 26,000 b/d for Saudi Arabia and 8,000 b/d for the UAE.

Ministers will convene again Sept. 5 to set October production targets.

The OPEC+ alliance, which include Russia, restored its production quotas back to prepandemic levels as of August.

But with Dated Brent prices still well above $100/b and contributing to sky-high inflation in many major economies, Saudi Arabia and the UAE have faced ratcheting pressure from key customers, including the US, Japan and France, in recent weeks, to increase crude production.

Biden visited Saudi Arabia in mid-July for a summit with regional leaders and emerged from the trip confident that the producer bloc would heed his request.

French President Emmanuel Macron also hosted Crown Prince Mohammed bin Salman in Paris to discuss oil supplies, and Japanese Foreign Minister Hayashi Yoshimasa met with Saudi Arabian counterpart Prince Faisal al-Saud in Tokyo to push for more crude.

Potential headwinds

Saudi Arabian officials had been more circumspect, saying only they would evaluate the market’s needs, but a sign of a potential quid pro quo emerged Aug. 2, with the US State Department approving the sale of a $5 billion missile defense system to the kingdom.

Persian Gulf leaders had said enhancing regional security in the face of attacks by Iran-backed groups, including on vital oil and shipping infrastructure, was a top priority.

A more aggressive production hike was unlikely on the cards, OPEC+ delegates had signaled leading up to the meeting, with nervous eyes on demand slippage from rising COVID-19 rates and the prospects of a recession in the months ahead.

But the decision will nevertheless eat into the group’s rapidly depleting spare production capacity, which Platts Analytics estimated at 1.1 million b/d as of September — all held by Saudi Arabia and the UAE — nearing historic lows seen only during times of war or other energy crises. The thin buffer would limit their ability to respond to any further supply outages.

Source: Spglobal.com