On Wednesday, the top oil producers in the world will gather in an important order to decide oil prices and how much oil they will add to the market starting in September.
The US President, Joe Biden, visited Saudi Arabia just a few weeks prior in an effort to personally persuade the nation to increase production in order to help lower the price spike.
Since February, the price of crude has routinely been above $100 per barrel, increasing the cost of living in many nations.
The Organization for Petroleum Exporting Countries (Opec13 )’s core members are expected to decide to increase oil supplies, according to the White House. Although it’s not a given that
In order to stabilize the global oil supply and price, Opec was established as a cartel in 1960.
The cartel’s largest producer is Saudi Arabia, and President Biden stated that he anticipates supplies to rise after meeting with Saudi Crown Prince Mohammed Bin Salman. The decision to raise supplies, however, would be made after consulting with Opec+, Saudi officials have emphasized.
When deciding how much crude oil to sell on the international market, Opec+, a larger group of 23 oil-exporting nations that includes Russia, meets each month in Vienna.
As demand decreased throughout the coronavirus pandemic, Opec+ started a series of cuts back in April 2020. These cuts persisted. It has been gradually replenishing this lost supply since 2021.
At their most recent meeting, Opec+ resolved to raise their production of barrels slightly for the month of August. But it might be difficult to just turn the faucets on full. Several cartel members, including Angola, Nigeria, and Malaysia, are already having trouble meeting their current monthly supply objectives, at least on paper.
Likewise, as a result of western sanctions, Russian shipments have decreased. While this is going on, Moscow has increased its supplies to clients in Asia, like China and India.
Only two of the big players have some capacity left: the lynchpin Saudi Arabia and its neighbor, the United Arab Emirates. However, the 11 million barrels of oil per day that Saudi Arabia is aiming to produce in August suggests that the country’s oil output is currently at a very high level and that there is limited potential for further growth.
Uncertainty regarding energy demand in the upcoming months, though, might have had a bigger impact on the couple’s choice.
A substantial decline in demand could be caused by factors including rising interest rates, the conflict in Ukraine, and the impending recession in many western nations. These elements, according to experts, might prevent the organization from acting boldly and from drastically increasing its productivity.
Russia, behind the United States and Saudi Arabia, produced the third-most oil prior to the invasion of Ukraine. 8–10% of the world’s oil supply is made up of it.
According to market analysts, President Vladimir Putin wants to maintain high oil prices in order to continue funding the Ukraine conflict and fend off the effects of devastating western economic sanctions.
Saudi Arabia places a premium on maintaining Opec+’s unity and will refrain from taking any actions that can compromise it.
The future of oil prices is uncertain
Although at a slower rate than last year, according to Opec, the world’s oil demand will increase in 2023. The coronavirus’s growth in China, according to its analysts, will play a part in what happens next.
Estimates from the US Energy Information Administration and the International Energy Agency, however, indicate that oil demand will continue to rise sharply despite slowing economic development and mounting concerns about inflation in several different countries.
Given capacity limits and the lack of investment in downstream and refining, oil producers may find themselves having to pump oil at a faster rate than they have in the previous five years to balance out supply and demand.
The markets are quite volatile, but few observers anticipate a lasting decrease in oil prices below $100 per barrel, according to Ben Cahill, a senior scholar at the Centre for Strategic and International Studies in Washington.
This year, the price of gasoline has already risen to a 13-year high in the United States.
As part of a strategy to add 180 million barrels to the market over a six-month period ending at the end of October, the US has been releasing around a million barrels per day from its Strategic Petroleum Reserve (SPR) since April.
