OPEC+ Agrees to Increase Production by 100,000 Barrels per Day... Lowest Ever Increase

July-August Production Increase Only 15%... Lowest Since 1986
OPEC+ "Very Limited Capacity for Increase... Preparing for Winter"

[Image source=AP Yonhap News]

[Asia Economy Reporter Hyunwoo Lee] The Organization of the Petroleum Exporting Countries (OPEC) and the coalition of major non-OPEC oil-producing countries including Russia, known as OPEC Plus (OPEC+), announced that the oil production increase for September has been set at an all-time low of 100,000 barrels per day. With Russia continuing to be included in this OPEC+ production increase allocation, the actual effect of the increase is expected to be minimal.

Despite U.S. President Joe Biden personally visiting Saudi Arabia to request an increase in production, Middle Eastern countries including Saudi Arabia have remained steadfast in maintaining price collusion to sustain high oil prices. Concerns are also rising that deteriorating relations between the U.S. and Saudi Arabia will further strengthen close diplomatic ties among Saudi Arabia, Russia, and China.

On the 3rd (local time), OPEC+ announced after its regular meeting to decide production levels that "the oil production increase for September has been set at 100,000 barrels per day." According to Bloomberg News, this production increase figure is the lowest since 1986 and is a negligible amount that will hardly affect international oil prices.

OPEC+ explained in a statement, "Given the severely limited additional production capacity, it must be used very cautiously," adding, "This cautious decision was made in preparation for the winter season when oil prices could surge again." Especially with Russia, currently under sanctions, included in this production increase allocation, the actual effect of the increase is expected to be almost nonexistent.

Since the first OPEC+ meeting held after President Biden’s visit to Saudi Arabia last month failed to produce a visible decision on increasing production, concerns are growing about worsening tensions between the U.S. and Saudi Arabia. Earlier, during Biden’s visit last month, Crown Prince Mohammed bin Salman, the de facto ruler, stated that additional production increases would be difficult.

Edward Moya, senior analyst at U.S. foreign exchange brokerage OANDA, told AFP in an interview, "The current production increase is at a level that hardly helps the international energy crisis," adding, "Despite recession concerns, international oil prices are expected to remain around $100 per barrel. The Biden administration will not be satisfied with this, and it will act as an obstacle to improving relations with Saudi Arabia."

Russia also emphasized its continued price collusion by showcasing cooperation with Middle Eastern oil-producing countries such as Saudi Arabia at this meeting. Russian Deputy Prime Minister Alexander Novak explained in an interview with state-owned Rossiya 24 TV after the OPEC+ meeting, "Considering uncertainties in the market such as the resurgence of new COVID-19 variants and restrictions on oil sales to Russia, we made this cautious decision."