OPEC+ meets as U.S. considers massive release of oil reserves
Saudi Energy Minister Prince Abdulaziz bin Salman has said Tuesday that OPEC+ would keep politics out of its decision-making process.
Ian Forsyth | Getty Images News | Getty Images
A group of some of the world’s most powerful oil producers on Thursday will meet to determine the next phase of output policy following reports the U.S. is considering the largest ever draw from its emergency oil reserve.
OPEC and non-OPEC partners, an influential energy alliance known as OPEC+, will hold talks via videoconference from around 12:30 p.m. London time.
Energy analysts expect OPEC+ to stick to its strategy of gradually reopening the taps despite sustained pressure from top consumers calling for the group to pump more to cool soaring oil prices and aid the economic recovery.
Oil prices have rallied to a near all-time high on concerns about Russian supply disruptions after the U.S. and international allies imposed a barrage of economic measures against the Kremlin as a result of its unprovoked onslaught in Ukraine.
To be sure, Russia is the world’s third-largest oil producer, behind the U.S. and Saudi Arabia, and the world’s largest exporter of crude to global markets. It is also a major producer and exporter of natural gas.
It is against this backdrop that the U.S. is considering a plan to cool soaring crude prices by releasing up to 180 million barrels from the country’s strategic petroleum reserve, Reuters reported Wednesday, citing four unnamed sources. President Joe Biden is expected to deliver remarks later on Thursday.
The move would mark the third time the U.S. has tapped its SPR in six months and the second since Russia’s invasion of Ukraine on Feb. 24.
Oil prices dropped sharply on the news. International benchmark Brent crude futures traded 5.8% lower at $106.87 a barrel on Thursday morning in London, while U.S. West Texas Intermediate futures fell 6% to $101.33.
Supply shock
Edward Bell, senior director of market economics at Emirates NBD, said Thursday that he expects OPEC+ to stick to its existing policy.
“When you look at the structure of forward curves, they are very much telling you that this is not a market that is well supplied and there is a considerable supply shock going forward over the rest of 2022,” Bell told CNBC’s “Capital Connection.”
“I don’t think though that this is really going to push OPEC+ to try and increase the scale of their production at a faster pace,” Bell said, particularly given that the U.S. is reportedly considering the release of up to 180 million barrels from the SPR.
“What this may do is just be the ammunition OPEC+ needs to say ‘Well, look, there is oil available out there, you can draw it out on the reserves.’ We have seen similar messaging from OPEC countries in the past when there have been requests for faster increases.”
OPEC Secretary-General Mohammad Barkindo has encouraged OPEC+ ministers to “stay the course” and “remain vigilant and attentive to ever-changing market conditions.”
Aaron M. Sprecher | Bloomberg |…
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