static01.nyt.com
static01.nyt.com is blocked
This page has been blocked by an extension
- Try disabling your extensions.
ERR_BLOCKED_BY_CLIENT
Reload
This page has been blocked by an extension
Advertisement
The oil cartel known as OPEC Plus announced on Sunday a modest increase in how much it plans to pump, continuing its monthslong pledges to step up global supply amid extreme volatility in the energy markets and the Middle East.
Since March, the war in Iran caused the price of oil to surge and, more recently, to drop drastically as delegates from Iran and the United States attempt to negotiate a lasting resolution to the conflict. The fallout of the war has landed squarely on delicate geopolitical alliances in the region. And the clout of OPEC, long dominated by Saudi Arabia, was tested in late April when the United Arab Emirates, a regional power at odds with Riyadh over how much oil it should produce, quit the alliance.
The Organization of the Petroleum Exporting Countries and some of its allies including Russia, operating as a group called OPEC Plus, said it would boost production by 188,000 barrels per day in August. The countries involved in Sunday’s decision were Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria and Oman.
“The countries will continue to monitor and assess market conditions, and in their continuous efforts to support market stability, they reaffirmed the importance of adopting a cautious approach,” the consortium of oil-producing nations said in a statement.
The United States and Iran signed a framework agreement on June 17 to reopen the Strait of Hormuz, ending a nearly four-month closure that severely restricted global oil supplies.
The disruption to shipping made OPEC’s production increases during the war largely symbolic. But more ships have started to move through the strait in the past two weeks, and analysts said the oil market is not likely to register the decision on Sunday. Saudi Arabia and Persian Gulf producers are already actively ramping up oil shipments, and prices have fallen back near prewar levels. Brent crude, the global market benchmark, was at about $72 a barrel on Friday after going as high as $118 in the early stages of the war.
Jan.MarchMay$0$20$40$60$80$100 per barrel
Since June 17, Saudi Arabia has shipped 34 million barrels through the strait, according to Kpler, a global maritime data firm. The Saudis have also been distributing millions of barrels of oil by land through pipelines. The International Energy Agency and multiple other institutions have warned that as oil shipments resume, the global crude market will swing from a deficit into oversupply.
“A wave of oil is about to enter the market,” JP Morgan analysts warned in their weekly note on Thursday.
“And here lies the paradox,” the analysts wrote, adding, “The surge in oil supply is about to collide with a market that, at least for now, simply does not need it.”
The war began on Feb. 28, when the United States and Israel led joint strikes on Iran, which retaliated by closing the strait. A fifth of the world’s oil and one quarter of its liquefied natural gas was choked off.
On Tuesday, U.S. and Iranian negotiators were in Qatar to hold talks with mediators toward a peace deal. But just days before, there was another series of attacks and counterattacks by both Iran and the United States. One of the most contentious divisions is how the strait will be administered going forward, with Iran insisting that it keep operational control and threatening to attack ships that do not follow its rules for transit.
Johannes Rauball, a senior oil analyst with Kpler, said he believed that the continued uncertainty over the peace deal could prevent oil flows out of the strait from fully returning to prewar levels for quite some time.
“Vessel owners are still very cautious,” he said, adding, “We’re going into a market that has been tested to its limits.”
And yet at the moment, oil producers appear eager to pump as much as they can as quickly as they can, a dynamic that will test OPEC’s longstanding goal of steering the price of oil by controlling the bulk of the world’s supply of crude.
The decision by the Emirates to quit OPEC left the group without its third-largest producer. The Emiratis, which have capacity to drill more, had for many years expressed dissatisfaction with the group’s production quotas.
Now the Emirates is exporting record oil volumes. Its crude exports have averaged about 3.7 million barrels a day this month, the highest level on record, data from Kpler shows.
“With the U.A.E. leaving, that means they can produce what they want or what the market will take, and that will result in tensions within the group,” Mr. Rauball said.
The countries of OPEC Plus supplied more than a quarter of the world’s oil before the war with Iran began. Without the Emirates, it now controls just over 20 percent.
“Saudi Arabia is going to be working hard to make it look as though the whole group speaks with one voice, but there is probably going to be some friction behind the scenes,” said Gregory Brew, an analyst at the Eurasia Group, a research firm.
“Once they are able to produce at capacity and export at higher levels, all of the Middle East producers are going to want to pump as much as they can, and there’s going to be concern around OPEC maintaining its unity,” he said.
The increased production in August is part of a decision that OPEC made in 2023 to gradually reverse a 1.65 million barrel per day production.
In June and May, OPEC Plus announced a modest 188,000 barrel per day increase; before that, the group had said it would raise oil production quotas by 206,000 barrels a day. The organization said it would “review market conditions” monthly, and meet next on Aug. 2.
Lisa Friedman is a Times reporter who writes about how governments are addressing climate change and the effects of those policies on communities.
- Share full article
Related Content
Advertisement
The New York Times
Read Original at The New York Times →