OPEC: Saudi Arabia Gives a Nod to US with an Increase in Oil Production

OPEC: Saudi Arabia Gives a Nod to US with an Increase in Oil Production

OPEC: Saudi Arabia Gives a Nod to US with an Increase in Oil Production

OPEC sees global oil demand growth slowing in 2023 (credits:-google)

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  • The tiny supply increase, equivalent to only 0.4 percent of world demand in July and August.
  • Producers raise the size of the monthly supply increase by 50%.
  • Suggestion comes amid mounting pressure in United States for assistance in lowering prices.
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OPEC+ agreed to accelerate the opening of its oil streams in the summer months, a gesture of reconciliation to the US that maintains Russia at the core of the organization.

The White House celebrated the agreement, which came after months of diplomatic pressure on Saudi Arabia to reduce the spike in energy prices that has wracked the economy since President Vladimir Putin’s decision to invade Ukraine.

The tiny supply increase, equivalent to only 0.4 percent of world demand in July and August, may help to calm market tensions. However, it does not address whether the US can transform Saudi Arabia into an ally in its campaign to economically isolate Russia.

Read More: As energy prices rise, the OPEC+ partnership expands oil production

“The frost is melting in Saudi-US diplomatic relations, but it will take more progress before full normalization,” said Bill Farren-Price, a director at Enverus Intelligence Research. “Whether the US will be able to drive a wedge between Riyadh and Moscow is a bigger challenge.”

Ahead to Thursday’s Organization of the Petroleum Exporting Countries meeting, oil had dropped on allegations that Saudi Arabia and other members were willing to cover the market gap left by Western sanctions on Russian oil, or possibly remove Russia from the OPEC+ quota system entirely. Russia’s output has already dropped by around 1 million barrels per day since the start of the war, and it may drop even further now that the European Union has agreed to additional restrictions on its oil.

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The eventual policy shift reached by the Organization of Petroleum Exporting Countries and its partners was significantly less dramatic. The group approved a rise in oil output of 648,000 barrels per day for July and August, which is roughly half of the increase witnessed in recent months. Moscow fully supported the idea, and talks were ended in just 11 minutes, according to participants who asked not to be identified because the material was secret.

Read More: Saudi Arabia discusses oil production with Russia and US

Farren-Price described the agreement as  “a pretty minor tweak,” Given the cartel’s recent inability to meet output targets, several analysts expected that the increased volumes that would actually reach the market would be substantially lower than the headline figure.

West Texas Intermediate crude jumped 1.4 percent to $116.87 a barrel in New York on Thursday, reversing earlier losses.

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