• Friday, March 29, 2024
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BusinessDay

OPEC agrees to up supply after US lobby

Rising oil output from Nigeria raised OPEC’s June production

Oil reversed losses to trade near $116 as OPEC+ ministers agreed to boost supply increases by around 50%, after prices dropped on reports US President Joe Biden is likely to visit Saudi Arabia this month and that the kingdom is ready to pump more crude.

West Texas Intermediate fell more than 3%, while Brent traded as low as $112.80, before the start of the meeting on Thursday.

Ministers from the group agreed to add 648,000 barrels a day of oil to the market in July and August, up from 432,000 barrels a day in recent months, delegates said, asking not to be named because the discussions were private.

The earlier decline followed a steep rise in prices last month and comes amid signs that the strained relationship between Saudi Arabia, the world’s biggest oil exporter, and the US is improving.

Biden will almost inevitably meet de facto Saudi ruler Crown Prince Mohammed Bin Salman, who he has so far shunned, if he does travel to the country.

That may pave the way for a production boost from the kingdom and help lower US fuel prices, which have soared to record highs, putting pressure on Biden ahead of November’s mid-term elections.

“There have been talks about an immediate supply boost from Saudi Arabia and the United Arab Emirates, which could be announced at the OPEC+ gathering, though nothing has been finalized, the FT reported.

Read also: Amid sliding capacity, OPEC raises Nigeria’s quota to 1.77m bpd

Output increases scheduled for September might be brought forward to July and August, it said. The Wall Street Journal also reported this week that some OPEC members were discussing exempting Russia from their oil-production agreement.

There is no indication that the Saudis are going to unilaterally make up for lost barrels — thus really breaking apart the existing agreement,” said Rebecca Babin, senior energy trader at CIBC Private Wealth Management. “If they are just pulling forward barrels there is no real change to production.”

If the Saudis do pump more it would be a turnaround. The kingdom’s foreign minister said last week that there was nothing more it could do to tame oil markets, and even suggested there was no shortfall of crude.

OPEC+ was expected to rubber-stamp a production boost of 430,000 barrels a day for next month, although the alliance has struggled to meet its targets in recent months.