OPEC+ Maintains Control of Oil Market as Ministers Convene Again, According to Bloomberg

OPEC+ is firmly in control of the oil market as ministers convene for their monthly meeting. Currently, crude oil prices are just below $80 per barrel in London, the highest level seen in nearly three years. This production policy will significantly influence prices in the upcoming months, according to oil trader Vitol Group.

Saudi Arabia’s production is nearly back to pre-pandemic levels, yielding its highest petroleum revenues since 2018. The other OPEC+ members are united in their strategy to gradually reinstate 400,000 barrels per day of dormant production each month. A U.S. official has indicated that Washington is content with the current pace of supply increases.

Analysts, including Amrita Sen from Energy Aspects Ltd., anticipate that OPEC+ will maintain its existing plan during this meeting. As long as oil prices stay within the $70 to $80 range, the incentive for any drastic changes to the agreement appears limited.

The Organization of the Petroleum Exporting Countries and its allies approach this meeting with notable stability, marking a stark contrast to the chaos experienced over the past year. Conflicts stemming from the pandemic, including a fierce price war between Russia and Saudi Arabia and disputes over production quotas, have faded into the background.

However, external crises could threaten the fragile balance that OPEC+ has established. The current shortage of natural gas, which is driving prices for that fuel to an equivalent of $190 per barrel, is increasing the demand for oil products for heating and manufacturing.

Meanwhile, U.S. oil production is still recovering from the impacts of Hurricane Ida, which disrupted nearly 35 million barrels of output in the Gulf of Mexico last month—roughly equal to two months’ worth of OPEC+ supply increases.

Concerns are rising among major consuming countries about inflationary pressures stemming from increases in energy, food, and metal prices. These developments complicate monetary policy strategies.

In recent discussions, U.S. officials communicated to Saudi counterparts the importance of monitoring any shifts between supply and demand, particularly in relation to natural gas. Both Riyadh and Washington have agreed to keep close communication and ongoing market oversight.

Sen emphasized that Saudi Arabia is particularly focused on reducing volatility in oil prices, both upward and downward. Should prices surge unexpectedly, the nation would be ready to respond swiftly.