OPEC+ agrees to small oil output hike

The OPEC+ oil cartel agreed to a small increase in production Wednesday, likely disappointing US President Joe Biden who lobbied for a big hike to tame soaring energy prices on a recent trip to Saudi Arabia.

The cartel led by Saudi Arabia and Russia decided to raise production by 100,000 barrels per day for September, much lower than previous increases, according to a statement issued after a ministerial videoconference.

Oil prices had fallen earlier this week but they rose more than one percent on news of the OPEC+ decision, with the main international contract, Brent, climbing back above $100 per barrel.

“The smallest increase in OPEC+ history will do little to help the ongoing global energy crisis,” Edward Moya, analyst at OANDA trading platform, told AFP.

“Oil looks like it will still remain stuck around the $100 barrel level even as the global economic slowdown accelerates. The Biden administration will not be happy and this will be a setback in improving US-Saudi relations,” Moya said.

With energy prices soaring following Russia’s war in Ukraine, Biden made a controversial trip to Saudi Arabia in July in part to convince the kingdom to loosen the production taps to stabilize the market and curb rampant inflation.

The US president met Crown Prince Mohammed bin Salman despite his promise to make the kingdom a “pariah” in the wake of the 2018 killing of journalist Jamal Khashoggi.

Biden said after his meetings with Saudi officials that he was “doing all I can” to increase the oil supply.

But OPEC+ includes Russia, putting Saudi Arabia in a tight spot between Washington and Moscow.

“A 100,000 barrel per day output hike is a pittance,” said Han Tan, chief market analyst at Exinity.

“It’s likely that the Biden administration will feel let down, considering its overtures to Saudi Arabia have yielded scant results, at least this time around,” Tan said.

Western lobbying

Biden is not the only Western leader to have lobbied bin Salman.

French President Emmanuel Macron hosted him last week in Paris, with Macron’s office saying the two leaders agreed to work “to ease the effects” of the Ukraine war.

Before resigning as British prime minister, Boris Johnson had also visited bin Salman in Riyadh in March to plead for higher oil production.

After cutting production in 2020 in response to falling prices during the COVID pandemic, OPEC+ agreed to raise its quotas last year as demand rebounded.

OPEC+ began to add around 400,000 barrels per day to the market last year, renewing the policy every month until June. It upped production by almost 650,000 bpd in July and August.

Its output is supposed to have returned to pre-COVID levels after cuts totaling 9.7 million bpd — but only on paper, as some members of the 23-nation group have struggled to meet their quotas.

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