ALEXANDRIA, Va.—OPEC+ agreed to raise the amount of crude oil production by 648,000 barrels per day in both July and August, which was more than expected, CNBC reports. The higher amount marks the end of the historic output cuts OPEC+ had implemented during the COVID-19 pandemic.
Over the past few months, OPEC has been maintaining a modest pace of oil output, rising between 400,000 and 432,000 barrels per day each month.
Oil prices reversed early losses and traded higher at 9:45 a.m. on Wall Street, according to CNBC. West Texas Intermediate crude futures, the U.S. oil benchmark, added 0.75% to trade at $116.13 per barrel. International benchmark Brent crude was 0.5% higher at $116.90 per barrel.
The Russian-Ukrainian war has wreaked havoc on oil prices, and crude oil has not been below $100 a barrel since Russia invaded Ukraine on February 24, reports the Wall Street Journal. Saudi Arabia is the leader of the Organization of the Petroleum Exporting Countries and 10 non-OPEC producers led by Russia (OPEC+) and has not obliged to the U.S., U.K. and other Western countries’ requests for more oil production to reduce prices.
“We recognize the role of Saudi Arabia as the chair of OPEC+ and its largest producer in achieving this consensus amongst the group members,” White House press secretary Karine Jean-Pierre said in a statement, before adding that the “United States will continue to use all tools at [its] disposal to address energy prices pressures.”
CNBC reports, however, that while there will be more oil in production, OPEC+ has been struggling to meet production quotas, and the additional oil won’t be enough to cover the potential loss of more than one million barrels per day from Russia, as nations around the world ramp up sanctions following the invasion of Ukraine.
This week, the European Union (EU) announced it would ban 90% of Russian oil imports by the end of the year. The announcement was made after the EU met in Brussels to discuss a sixth package of sanctions against Russia.
The Financial Times reported that Saudi Arabia was aware of the risks of a supply shortage and that it is “not in their interests to lose control of oil prices.” Sources told the Times that Saudi Arabia has not yet seen genuine shortages in the oil markets. However, this could change as global economies continue reopen and demand more oil, including China, which is the world’s largest oil importer.
“Whilst it’s not an outright promise, Saudi Arabia [has] seemingly thrown the West a bone,” Matt Simpson, market analyst at U.K.-based trading platform City Index, told CNBC.
“This will be well received by Western leaders given inflation—and inflation expectations—remain eye wateringly high, and central banks try to raise rates at the risk of tipping their economies into a recession,” he added.
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