OPEC+ Evaluates Strategies for Increasing Oil Market Supply – Sources, By Reuters

By Ahmad Ghaddar, Olesya Astakhova, and Alex Lawler

OPEC+ is considering expanding its current agreement to increase oil production by 400,000 barrels per day (bpd) during its upcoming meeting next week. This deliberation comes at a time when oil prices have soared to nearly a three-year high, prompting consumers to call for increased supply.

The Organization of the Petroleum Exporting Countries, along with its allies led by Russia, will convene on Monday to reassess their output strategy. In July, the coalition reached an agreement to gradually increase production by 400,000 bpd each month in a plan to gradually eliminate 5.8 million bpd in cuts.

Four sources from OPEC+ indicated that producers are mulling over the possibility of exceeding this initial plan, although specific details regarding the potential increase or the timeline for added supply were not provided. One source suggested that an increase of 800,000 bpd might be feasible for one month, potentially followed by a reduction to zero in the subsequent month.

The earliest any increase could be implemented is in November, following the previous meeting which set the production volumes for October.

According to one of the sources, “We cannot exclude any option.” Another source remarked that the prospect of the market requiring more oil than what is stipulated in the existing agreement was “one of the possible scenarios.”

While there were reports suggesting that the most probable outcome would be adherence to the current plan, it’s unclear what has led to this shift in perspective. This change follows a meeting of the OPEC+ Joint Technical Committee, which evaluated the market outlook and adjusted projections for a supply surplus in 2022 downwards.

Discussions among OPEC+ members are ongoing ahead of the virtual meeting scheduled for October 4, with no assurances that an additional production increase will be finalized.

On Tuesday, oil prices climbed to over $80 a barrel, the highest level in three years, driven by unexpected outages in the United States and a robust recovery in global economic activity and energy demand as countries emerge from the pandemic. Prices were hovering just under $79 on Thursday.

The rising costs of oil, gas, coal, and electricity are contributing to inflationary pressures across the globe and hindering economic recovery.

White House Press Secretary Jen Psaki commented on Thursday that the high price of oil is a concern. She noted that this issue was a topic of discussion for National Security Adviser Jake Sullivan during his recent meeting with Saudi Crown Prince Mohammed bin Salman.

Previously, the U.S. government indicated it was in discussions with OPEC and exploring ways to mitigate rising oil costs.

India, the world’s third-largest oil importer and consumer, indicated on Tuesday that the surge in crude prices could accelerate the transition to alternative energy sources.

Energy ministers from OPEC member countries, including Iraq, Nigeria, and the United Arab Emirates, have recently stated that there is currently no necessity to implement extraordinary measures to alter the existing agreement.