OPEC+ agrees to raise output next month at much slower pace

Oil barrels Source: iStock

OPEC+ agreed on a production increase of 100,000 barrels a day for September, giving a tight market extra supplies at a much slower pace than in recent months. 

Ministers endorsed the proposal at an online meeting on Wednesday, delegates said, asking not to be named because the information wasn’t public. For July and August, the group had pledged to add more than 600,000 barrels a day to the market. 

The deal may offer little respite for consumers suffering the inflationary squeeze of high oil prices. Brent crude erased earlier losses, rising 1.3% to $101.80 a barrel as of 1:09 p.m. in London. 

The 23-nation alliance would divide the increase proportionally between members, delegates said. In recent months, with only the Saudis and the United Arab Emirates able to bolster production, just a fraction of the group’s promised increases have reached world markets. There were no discussions about whether the Organization of Petroleum Exporting Countries and its allies would keep increasing production beyond September, they said. 

The agreement is only a modest indication that Riyadh and Washington are on a path toward reconciliation, coming after a visit to the kingdom last month that saw US President Joe Biden greet Crown Prince Mohammad bin Salman with a fist bump. Late on Tuesday, the US approved the sale of $3.05 billion of weapons including Patriot missiles to the Middle East heavyweight.

OPEC+ had shown some goodwill toward consumers in recent months, fast-tracking the final production increases that completed the reversal of their Covid-era curbs. But the alliance appeared to have little appetite to go much further for now.

Prior to the talks, delegates privately indicated they were reluctant to add supplies when oil demand is constrained by the threat of recession in the US and Covid lockdowns in China. The Saudis ramped up output to 10.78 million barrels a day last month, according to a Bloomberg survey, a level pumped only on rare occasions that leaves limited spare capacity.

© 2022 Bloomberg L.P.

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