Sunday, June 23, 2024

Oil prices up by more than $2 per barrel after OPEC decision

by BIZ Magazine

By DAVID McHUGH and AAMER MADHANI Associated Press

FRANKFURT, Germany (AP) — OPEC and allied oil producing countries have stayed with their cautious approach to restoring oil production slashed during the pandemic, agreeing to add 400,000 barrels per day in November.

The decision Monday by the Vienna-based oil cartel tracks with its established schedule of adding back that amount of oil every month until the cuts made during the depth of the pandemic recession are restore.

The decision comes amid tighter oil markets, as driving and flying pick up around the globe due to the easing of restrictions aimed at containing the COVID-19 pandemic.

The price of a barrel of crude jumped by 3%, or $2.32, to $78.17 on the New York Mercantile Exchange.

THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.

FRANKFURT, Germany (AP) — With oil prices near three-year highs, OPEC and allied countries are deciding whether to stay with their plans to gradually restoring production that was cut back during the pandemic recession — or to pump more oil to a recovering global economy that’s increasingly thirsty for it.

Analysts say OPEC and its allies, known as OPEC+, will likely stick with their existing road map at an online meeting Monday. That would mean agreeing to add 400,000 barrels per day to output next month.

The plan has been to keep adding that amount through October, 2022 in order to restore the deep cutbacks made in April, 2020 that supported prices during the worst of the pandemic downturn.

But OPEC meetings can produce surprises. Demand for fuel has increased across the global economy as driving, shipping and flying pick up again following the lifting of restrictions imposed to contain the COVID-19 pandemic.

On top of that, unusually high prices for natural gas could support oil prices by lead some electricity producers in Asia to switch from natural gas to oil-based products.

OPEC and its partners are looking at a “significantly tighter oil market” than at their September meeting when there were lockdowns in parts of China and fears about the spread of the more contagious delta variant of the coronavirus, said Louise Dickson, senior market analyst at Rystad Energy.

She said that the oil ministers would likely stick to their cautious plan and wait for clearer market signals about oil demand in coming months. “In our view, they’re going to take a cautious approach, because it’s very uncharacteristic of OPEC to pre-emptively try to time the market.”

“OPEC right now is an advantageous market position. Their barrels are in high demand… so I don’t think they lose much by waiting a month in terms of timing the market,” said Dickson.

Rystad forecasts oil prices staying a bit below $80 through the last three months of the year, with some slight potential upside.

Oil traded up 0.3% at $76.12 per barrel Monday on the New York Mercantile Exchange, while international benchmark Brent crude traded up 0.4% at $79.63. Brent briefly topped $80 per barrel last week, underlining concerns about prices in the US, where higher crude prices can mean costlier gasoline for motorists.

White House national security adviser Jake Sullivan raised concerns about rising oil prices when he met officials in Saudi Arabia earlier this week in talks that largely focused on the war in Yemen, according to a senior administration official who spoke on the condition of anonymity to discuss private conversations. Sullivan and other members of his delegation reiterated the importance of creating conditions to support the global economic recovery caused by the coronavirus pandemic, the official added.

Earlier this week, White House press secretary Jen Psaki said that White House officials have stayed in communication with OPEC about prices and were looking for tools to address the issue as Brent crude topped $80 per barrel last month, the highest price in nearly three years.

U.S. national average gasoline prices have been holding steady at around $3.20 per gallon in recent days, according to motoring club federation AAA, which foresaw stable short-term gas prices with supply and demand “largely in sync.” The average is 97 cents more than a year ago.

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