Straight from the Source
On Thursday, June 2, OPEC+ ministers agreed to increase the size of its oil-supply hikes by almost 50% in response to months of global pressure. This production increase aims to ease the ongoing concerns of high energy prices, especially in the United States, and is scheduled to enter effect in July and August of 2022. Due to their high-volume capacity, Saudi Arabia and the United Arab Emirates are expected to play a major role in growing production.
The mounting concern of oil prices comes, in part, as a result of the Russia-Ukraine war, and this issue will serve as a hot topic in the upcoming U.S. congressional elections this November. Al Jazeera explains that “Russia’s production has dropped significantly since the invasion of Ukraine on a combination of western sanctions, shipping difficulties and rejection by some traditional customers. Its output was 1.3 million barrels a day below its OPEC+ target in April, according to the International Energy Agency.”
The decision to increase oil-supply hikes was agreed upon at the 29th OPEC+ and non-OPEC+ Ministerial Meeting, which was held virtually on June 2. Arn News Centre discussed OPEC+’s post-meeting remarks, showcasing the importance of balanced markets for crude oil as well as refined products. Following the meeting, OPEC+ stated that “it has been agreed to advance the planned overall production adjustment for the month of September and redistribute equally the 0.432 mb/d production increase over the months of July and August 2022. Therefore, July production will be adjusted upward by 0.648 mb/d as per the attached schedule.”
Discussed further in Arn News Centre, members scheduled the 30th Ministerial Meeting for the end of this month, June 30. The members also “agreed to extend the compensation period until the end of December 2022 as requested by some underperforming countries and request that these countries submit their plans by June 17.Compensation plans should be submitted in accordance with the statement of the 15th OPEC and non-OPEC Ministerial Meeting.”
The compliance of Saudi Arabia and the UAE comes as a surprise to some, following their previous refusals to increase oil supply. Prior to May 2022, the Biden administration had been urging Saudi Arabia to increase its output in oil, and this request has placed strain among the two countries. Highlighted in Arab News, Saudi Prince Turki Al-Faisal said “when you say that Saudi Arabia has not budged on the issue of the oil problems that America is facing, basically America itself is the reason for the state that they’re in because of their energy policy…According to Al-Faisal, President Biden’s decision to curtail oil and gas production in the US has ultimately resulted in the instability of oil prices.”
However, the U.S. officials were positively surprised by the results of Thursday’s meeting, as OPEC+, including Saudi Arabia, agreed to an oil production hike larger than expected. Saudi Arabia also complied with another U.S. foreign policy priority, accepting to assist in extending the U.N.-led truce in Yemen. In accordance with these successes, President Biden’s potential visit to Saudi Arabia is expected to occur before the end of June. The Naharnet states that this trip “would reportedly happen around the time Biden travels to a NATO summit in Spain and Group of Seven summit in Germany later this month. He is also widely expected to travel to Israel where, as in Saudi Arabia, he is sure to face pointed questions about slow-moving U.S. diplomacy with the two countries' rival, Iran.”
Various U.S. officials have applauded the participating countries for this decision, especially Saudi Arabia. Al Arabiya cited White House Press Secretary Karine Jean-Pierre’s words of praise following the Ministerial Meeting, “we welcome the important decision from OPEC+ today to increase supply in July and August based on new market conditions. This announcement brings forward the monthly production increase that was previously planned to take place in September. We recognize the role of Saudi Arabia as the chair of OPEC+ and its largest producer in achieving this consensus amongst the group members. We also recognize efforts and positive contributions of UAE, Kuwait, and Iraq.”