OPEC+ considers options for releasing more oil to the market
Published: 03:10 PM,Oct 01,2021 | EDITED : 07:10 PM,Oct 01,2021
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LONDON: Oil fell to around $78 a barrel on Friday on the prospect that OPEC+ producers might step up a planned increase in output to ease supply concerns, although crude remained in sight of a three-year high reached this week.
The Organization of the Petroleum Exporting Countries and allies, known as OPEC+, meet on Monday. Four OPEC+ sources said on Thursday the group was looking at going beyond an existing deal to add 400,000 barrels per day to supply each month.
Beyond October, “a faster ramp-up in OPEC+ production cannot be excluded,” said Stephen Brennock of oil broker PVM. “The prospect of $80 oil does not sit well with the producer group.”
Brent crude fell 47 cents, or 0.5 per cent, to $77.84 at 1015 GMT, heading for a weekly decline after three weeks of gains. US West Texas Intermediate (WTI) slipped 53 cents to $74.50, set for a sixth consecutive week of rises.
Crude also came under pressure on Friday from a strong US dollar and rise in US crude inventories reported this week. A strong dollar makes oil more expensive for holders of other currencies and tends to reflect lower investor risk appetite.
Even so, Brent has risen 50 per cent this year and reached a three-year high of $80.75 on Tuesday. OPEC+ is facing pressure from consumers such as the United States and India to produce more to help reduce prices.
Jeffrey Halley, analyst at brokerage OANDA, said there was potential for Monday’s OPEC+ meeting to disappoint in terms of adding more supply, citing the inability of some members to raise output and the appeal of high prices to boost revenues.
“Whichever way you cut it; shorting oil is only for the brave with very deep pockets,” he said.
Oil is also finding support as a surge in natural gas prices globally prompts power producers to move away from gas. Generators in Pakistan, Bangladesh and the Middle East have started switching fuels.
Meanwhile, four OPEC+ sources said producers were considering adding more than that deal envisaged, but none gave details on how much more, or when supply would increase. Another OPEC+ source suggested an increase of 800,000 bpd for one month was possible, with zero the next month.
The nearest month any increase could occur is November since OPEC+’s last meeting decided the October volumes.
“We cannot exclude any option,” one of the OPEC+ sources said. The idea that the oil market might need more oil than the existing deal planned for was “one of the possible scenarios,” said another of the sources.
On Wednesday, sources said the most likely outcome was sticking to the existing plan. It was not immediately clear what prompted the change of tone, but it follows a meeting of the OPEC+ Joint Technical Committee (JTC) which reviewed the market outlook and reduced the size of an expected supply surplus in 2022.
Talks among members continue ahead of the virtual OPEC+ meeting on October 4, with no guarantee an additional increase will be agreed.
Rising oil, gas, coal and power prices are feeding inflationary pressures worldwide and slowing the recovery.
“Obviously, the price of oil is of concern,” White House press secretary Jen Psaki said on Thursday. She said high oil prices were on national security adviser Jake Sullivan’s agenda when he met this week with Saudi Crown Prince Mohammed bin Salman.
Previously, the US government said it was in communication with OPEC and looking at how to address the cost of oil.
India, the world’s third-biggest oil importer and consumer, signalled on Tuesday that a spike in crude prices would speed up the transition to alternative energy sources.
Energy ministers from OPEC members Iraq, Nigeria and the United Arab Emirates said in recent weeks the group saw no need to take extraordinary measures to change the existing agreement. — Reuters
The Organization of the Petroleum Exporting Countries and allies, known as OPEC+, meet on Monday. Four OPEC+ sources said on Thursday the group was looking at going beyond an existing deal to add 400,000 barrels per day to supply each month.
Beyond October, “a faster ramp-up in OPEC+ production cannot be excluded,” said Stephen Brennock of oil broker PVM. “The prospect of $80 oil does not sit well with the producer group.”
Brent crude fell 47 cents, or 0.5 per cent, to $77.84 at 1015 GMT, heading for a weekly decline after three weeks of gains. US West Texas Intermediate (WTI) slipped 53 cents to $74.50, set for a sixth consecutive week of rises.
Crude also came under pressure on Friday from a strong US dollar and rise in US crude inventories reported this week. A strong dollar makes oil more expensive for holders of other currencies and tends to reflect lower investor risk appetite.
Even so, Brent has risen 50 per cent this year and reached a three-year high of $80.75 on Tuesday. OPEC+ is facing pressure from consumers such as the United States and India to produce more to help reduce prices.
Jeffrey Halley, analyst at brokerage OANDA, said there was potential for Monday’s OPEC+ meeting to disappoint in terms of adding more supply, citing the inability of some members to raise output and the appeal of high prices to boost revenues.
“Whichever way you cut it; shorting oil is only for the brave with very deep pockets,” he said.
Oil is also finding support as a surge in natural gas prices globally prompts power producers to move away from gas. Generators in Pakistan, Bangladesh and the Middle East have started switching fuels.
Meanwhile, four OPEC+ sources said producers were considering adding more than that deal envisaged, but none gave details on how much more, or when supply would increase. Another OPEC+ source suggested an increase of 800,000 bpd for one month was possible, with zero the next month.
The nearest month any increase could occur is November since OPEC+’s last meeting decided the October volumes.
“We cannot exclude any option,” one of the OPEC+ sources said. The idea that the oil market might need more oil than the existing deal planned for was “one of the possible scenarios,” said another of the sources.
On Wednesday, sources said the most likely outcome was sticking to the existing plan. It was not immediately clear what prompted the change of tone, but it follows a meeting of the OPEC+ Joint Technical Committee (JTC) which reviewed the market outlook and reduced the size of an expected supply surplus in 2022.
Talks among members continue ahead of the virtual OPEC+ meeting on October 4, with no guarantee an additional increase will be agreed.
Rising oil, gas, coal and power prices are feeding inflationary pressures worldwide and slowing the recovery.
“Obviously, the price of oil is of concern,” White House press secretary Jen Psaki said on Thursday. She said high oil prices were on national security adviser Jake Sullivan’s agenda when he met this week with Saudi Crown Prince Mohammed bin Salman.
Previously, the US government said it was in communication with OPEC and looking at how to address the cost of oil.
India, the world’s third-biggest oil importer and consumer, signalled on Tuesday that a spike in crude prices would speed up the transition to alternative energy sources.
Energy ministers from OPEC members Iraq, Nigeria and the United Arab Emirates said in recent weeks the group saw no need to take extraordinary measures to change the existing agreement. — Reuters