Russia's invasion of Ukraine has exacerbated concerns about oil supplies, sending prices to record highs this year / © Saudi Aramco/AFP/File
Major oil producers led by Saudi Arabia and Russia stuck to a previously decided output boost on Thursday, despite calls for bigger increases to tame crude prices.
Russia's invasion of Ukraine has exacerbated concerns about oil supplies, sending prices to record highs this year.
Oil prices fell following the announcement by the 13-nation Organization of the Petroleum Exporting Countries led by Saudia Arabia and its 10 partners headed by Russia.
In their monthly video conference, which lasted about an hour, the 23 members of OPEC+ agreed to add another 648,000 barrels per day in August, the same as for July.
"As expected, OPEC+ stuck to its planned 648,000 barrel increase in August and refrained from any decision beyond then," said Craig Erlam, a senior market analyst at OANDA trading platform.
This "could add an element of uncertainty to future targets, particularly given recent reports that even Saudi Arabia and UAE are running near capacity," Erlam added.
- 'Symbolic' -
Tamas Varga, an analyst with PVM Energy, said the decision seemed "symbolic" as most OPEC+ members have been failing to meet their output quotas.
"Now all eyes will be on Saudi Arabia and the United Arab Emirates," Varga said. "Any hint that they also struggle to increase output will probably be met with a fresh wave of buying."
The 13 members of OPEC, chaired by Saudi Arabia, and their 10 partners, led by Russia, drastically slashed output in 2020 as the coronavirus pandemic and the resulting lockdowns sent demand plummeting.
Since last year, they have been gradually increasing output again. In recent months, the United States and other top oil consumers urged OPEC+ to open the tabs more widely.
The group finally decided at its last meeting in early June to add 648,000 barrels per day to the market in July, up from 432,000 in previous months.
But the larger-than-expected boost failed to cool prices.
Since Russia invaded Ukraine on February 24, the international benchmark, Brent North Sea Crude, has added around 17 percent, while the US benchmark WTI has jumped more than 18 percent.
Analysts have warned that only a recession may be able to bring down prices.
"The prices will likely push higher unless the recession fears take the upper hand," said Ipek Ozkardeskaya, an analyst at Swissquote Bank.
"All the talk of a summer of discontent is likely to spill over into the autumn and winter as high oil and gas prices remain a feature of markets," said Jamie Maddock, an equity research analyst at Quilter Cheviot.
"Attention will now inevitably turn to what OPEC+ does from September," Maddock added.
- Biden heading to Saudi Arabia -
Production will be back to pre-pandemic levels after August, at least on paper.
Several OPEC+ members have been failing to meet the output quotas, while Iran and Venezuela -- and now also Russia -- are blocked by sanctions.
The United Arab Emirates said this week it was close to its oil output ceiling, ahead of a regional visit by US President Joe Biden, who is expected to lobby for increased production.
Biden will visit neighbouring Saudi Arabia, the world's biggest oil exporter, as part of his tour next month, but analysts doubt it will convince OPEC+ to boost output.
On Monday, at the meeting of the G7 club of industrialised nations in Germany, French President Emmanuel Macron was caught on camera telling Biden details of a conversation with UAE leader Sheikh Mohamed bin Zayed Al-Nahyan.
According to Macron, Sheikh Mohamed said the UAE was at its "maximum" capacity and Saudi Arabia also faced a limit for raising production.