OPEC+ and the Global Market
Contemporary Status of OPEC's Impact on the Global Market:
- In early September, oil prices rose about 3% as OPEC+ members agreed to a small production cut of 100,000 barrels per day. This reflects about 0.1% of the global oil demand.
- The production cut decision was made at the 32nd OPEC and non-OPEC Ministerial Meeting hosted virtually on September 5, 2022.
- A statement summarizing the meeting highlighted “the adverse impact of volatility and the decline in liquidity on the current oil market and the need to support the market’s stability and its efficient functioning.”
- The 33rd OPEC and non-OPEC Ministerial Meeting is scheduled for October 5, 2022 and will include a reassessment of production activities.
- OPEC+ has also announced the possibility of cutting back the supply in the event of a nuclear weapons deal between the U.S. and Iran, which would allow Iran to sell more oil on the open market.
President Biden's Diplomatic Efforts:
- In the wake of Russia’s invasion of Ukraine, crude oil prices briefly rose above $100 a barrel, as the U.S. and its western allies imposed sanctions on Russia. This reflects the highest global price levels since 2008.
- Russia accounted for 8% of the United States’ oil imports prior to the invasion.
- As part of the effort to relieve the alarming rise in gas prices for Americans, the Biden administration sought to increase the United States’ domestic oil production and encouraged Saudi Arabia and OPEC+ to do the same.
- In July 2022, President Biden along with a delegation of high-ranking State Department officials, including Secretary Blinken, visited Saudi Arabia and made a direct appeal to the lead oil-producing country in OPEC and its counterparts in the organization to increase their oil production, thus lowering U.S. gasoline prices.
- Subsequently, in early August, OPEC+ announced that it would produce an additional 100,000 barrels a day in September.
- This, however, is believed to barely make strides in reducing the global market price of oil – which can be seen with the current market rate of over $90 per barrel of Brent crude oil.