Major oil producers reached a deal on Sunday to increase production, a move that could help ease the pressure on gas prices and inflation as economies around the world recover after pandemic lockdowns.
The pact by OPEC Plus, as the group is known, aims to begin pumping more oil beginning next month. It resolved a dispute between the United Arab Emirates and Saudi Arabia that had blocked an agreement earlier this month and caused oil prices to spike, briefly hitting six-year highs on July 6.
Even before that, gasoline prices in the United States had been steadily rising. The average price of a gallon of regular gasoline in the United States is now $3.17, according to AAA. A year ago, as pandemic lockdowns kept people close to home, gas cost just $2.18 a gallon on average. And the higher gas prices have been adding to inflation, a key measure of which climbed at the fastest pace in 13 years in June.
Under the deal announced on Sunday, OPEC Plus, a group of 23 nations led by Saudi Arabia and including Russia , will increase output each month by 400,000 barrels a day, beginning in August. That will add about 2 percent to the world's supply by the end of the year. The group accounts for roughly 40 percent of the world's crude oil.
In its news release, OPEC Plus referred to "the ongoing strengthening of market fundamentals, with oil demand showing clear signs of continued improvement." It was an apparent change in tone from the ultra-cautious approach taken previously by the group's chairman, Prince Abdulaziz bin Salman, the Saudi oil minister.
As the world economy rapidly reopens and suppliers strain to keep up with demand, commodities, including oil, have jumped in price. OPEC Plus, for its part, has been withholding millions of barrels a day in potential oil production from the markets.
While some analysts expect the deal will help ease oil prices, with gasoline in the United States likely to follow suit, they still expect oil markets will remain tight in the coming months.
Gas prices are a politically potent and highly visible symbol of inflation. President Biden has felt pressure to address the rising costs, but he walks a fine line. He wants to gradually wean the United States off oil and gas, but at the same time he does not want fuel prices to rise so quickly that they put the brakes on the economic recovery.
"Today's deal will likely please the White House, which has worried not only about the impact of higher gasoline prices on U.S. consumers but also about a major rift between its key regional allies as it seeks to build a grand producer coalition to tackle climate change," wrote Helima Croft, head of commodities at RBC Capital Markets, an investment bank, in a note to clients on Sunday.
Gary Ross, chief executive of Black Gold Investors, an oil trading firm, agreed. "The U.S. has to be quite happy with the agreement," he said. "It shows that OPEC is going to increase supply to meet rising potential demand."
Where prices go from here is a matter of intense debate. Some analysts say that even with more oil from OPEC Plus, markets are likely to remain tight in the coming months. Brent crude, the international benchmark, closed at a little over $73 a barrel on Friday. Goldman Sachs forecasts that it could reach $80 a barrel this summer, and other forecasters say that reaching the $100 mark in the coming years is a distinct possibility.
Other analysts say there is plenty of potential supply that could be unleashed to cap any price rises. "There is a huge amount of spare capacity in the OPEC Plus countries," said Michael Lynch, a distinguished fellow at the Energy Policy Research Foundation in Washington. Mr. Lynch says that the recent highs in oil prices may turn out to be a peak for some time.
Tom Kloza, global head of energy analysis for the Oil Price Information Service, a data provider, said that gasoline prices could head down later in the year when demand falls unless hurricanes cause refinery outages. "By and large prices will be lower on a nationwide basis than what we are seeing now," he said.
- The Biden administration, under fire for supply chain woes, says stores will be fully stocked for the holidays.
- The Fed chair will tell lawmakers that Omicron increases inflation uncertainty.
- Clearview AI, a facial recognition company, is fined for breach of Britain's privacy laws.
Whether OPEC Plus can hang together despite the major changes occurring in the energy markets is another question. The Saudis essentially gave in to the Emirates, letting their Persian Gulf neighbor have the increase in its production quota that it was seeking, although not until after next April. Other countries, including Kuwait, Iraq, Saudi Arabia and Russia, will also be granted increases in the baselines from which their production limits are calculated, according to OPEC 's statement.
The group did yield to a Saudi request to extend the overall production agreement through the end of 2022.
The agreement ended a standoff between Saudi Arabia, the de facto leader of the cartel, and the Emirates, which has invested heavily in expanding oil production and has chafed against the group's limits on output.
"We are here to stay," Prince Abdulaziz, the Saudi oil minister, said during a news conference after the meeting. "What bonds us together is way beyond what you imagine."
What matters about this agreement is not the production numbers — which can be changed by monthly reviews — but that the organization was able to reach a consensus under trying circumstances, said Bhushan Bahree, an executive director at IHS Markit, a research firm.
"The important thing is that they faced a problem, and they overcame it," Mr. Bahree said.
Other tests, though, are likely to come as subsequent meetings present opportunities for negotiation. The dispute with the Emirates could be a harbinger of changes that may drive wedges between the different members of the group.
The environment that OPEC has long operated in is changing. The organization's calculation has been that seeking higher prices by restraining production was a smart strategy because there would always be demand for the vast resources its members still have in the ground.
Climate change has upset that long-range outlook. The deadly floods in Europe this week are just the latest weather catastrophe prompting lawmakers to call for more stringent rules on greenhouse gas emissions. Some countries that rely on fossil fuels as a major source of government revenue may seek to turn their reserves into cash while they still can. Over time, that could lead to more production that could drive prices down.
"This latest OPEC bust-up highlights important changes in oil marketing strategy that are starting to spread across the global oil patch," said Jim Krane, a fellow at Rice University's Baker Institute.
The United Arab Emirates, whose oil production is dominated by the emirate of Abu Dhabi , has for some time been moving in a direction likely to lead to differences with the rest of OPEC.
The emirate's government is investing heavily in the Abu Dhabi National Oil Company, bringing in international companies to explore and develop new resources and bolster activities like refining and the trading of oil products.
The leadership of Abu Dhabi increasingly saw the country's quota of about 2.7 million barrels a day as both unfair and not in the national interest. The national oil company's production capacity has already reached about four million barrels a day and is heading toward five million barrels a day.
Like other OPEC members, the United Arab Emirates leadership is also disgruntled about the changed dynamics in OPEC since 2016, when Saudi Arabia brought Russia in as a top associate in what has now become OPEC Plus. As happened earlier this month, important moves are often worked out between Riyadh and Moscow, leaving other members little choice but to come on board. This arrangement has grated on some members, particularly the Emirates, a neighbor and traditionally a close ally of the Saudis.
In early July, the Emirates' oil officials made their displeasure clear during a series of OPEC Plus meetings. Suhail al Mazrouei, the U.A.E.'s oil minister, insisted that the country's quota should be calculated from a higher baseline than the one set in April 2020, in an emergency deal at the beginning of the pandemic.
The Saudis balked, saying that a new quota for one member would lead to others demanding changes.
Evidently, both countries realized that at this time they are better off reaching a compromise. Despite the focus on Russia, Saudi Arabia did not want to risk losing the presence of a big producer like the United Arab Emirates in the organization.
The oil world, though, is changing. Mr. al Mazrouei said at the news conference that while his country was happy with its new deal, he noted that it would run until the end of next year — not indefinitely.
"Anything beyond that I think we all as countries will talk about it," he said.
- Oil prices ease after OPEC, allies agree to taper oil supply curbs
- Oil slips as traders eye supply cut easing at OPEC meeting
- OPEC chief sees oil market moving closer to balance before key meeting
- Oil prices slip after OPEC, allies agree to loosen oil supply curbs
- OPEC and allies to ease cuts, allow more oil production
- Oil prices fall again despite Opec+ deal to cut production
- Trump says US will cut oil production to secure global deal
- OPEC, allies agree to extend deep output cuts through July
- OPEC says global oil demand set for record rise in 2021
- OPEC+ decides to move to 2nd phase of oil cuts by easing output restrictions
- Oil price slips as traders eye supply cut easing at OPEC meeting
- Crude oil prices fall after Opec+ agrees to ease output curbs
- OPEC+ eases record oil cuts as economy recovers from pandemic
- Crude oil prices dip on surge in Covid-19 infections
- Oil slide expected in August as OPEC+ may boost production
- OPEC sees oil demand soaring in 2021 but still below 2019
- ANALYSIS: Brazil boosts oil exports to Asia as global rivals make record cuts
- Crude oil prices gain after big US drawdown, eyes on Opec committee meeting
- Asia Distillates-Gasoil cracks inch higher; near-term excess supply feared
- Russia's Oil Giant Rosneft Welcomes Initiative on Oil Extraction Freeze
|Black USB Mini Speaker for ipod nano Video Classic Touch plus Clip on Earphone New (check at Amazon)||3.6|
|Creative Zen V and Zen V Plus Snap-on Crystal Case Cover with Lanyard - 5 Color Options (check at Amazon)||2.0|
|HTC One SV Armor Plus Black on Black Rugged Case (check at Amazon)||0.0|
|Silver iPhone 6 Plus Case, Elemental Cases Crystalline Case for 5.5" Apple iPhone 6 Plus, Snap On Hard Back Cover (Silver 5.5") (check at Amazon)||0.0|
|Pink Camo Reat Tree Lg Octane Vn530 Verizon Page Plus Snap on Hard Rubberized Faceplate Phone Cover Case Accessory Protector (check at Amazon)||0.0|
|Spring Sparrow Bird Lg Octane Vn530 Verizon Page Plus Snap on Hard Rubberized Faceplate Phone Cover Case Accessory Protector (check at Amazon)||0.0|
|BlackBerry Unlimited Add-on (Send and receive personal e-mail, plus web access; no corporate e-mail) (check at Amazon)||3.7|
|Iphone 6 Plus (5.5inch) Case with Magnetic Closure with Belt Clip and Belt Loops (Plus Size Will Fit w/ Otterbox Commuter On) $8.99 (check at Amazon)||4.7|
|Turuoise Polka Dot Lg Octane Vn530 Verizon Page Plus Snap on Hard Rubberized Faceplate Phone Cover Case Accessory Protector (check at Amazon)||0.0|
|Doraemon Graphic Attractive Collection Cartoon Iphone 6 Plus Snap On Case (5.5 Inch) (check at Amazon)||0.0|
|Keep Calm and Move to Paris Customized Rubber White iphone 6 plus Case On Custom Service (check at Amazon)||2.0|
|White Red Green Flower Lg Octane Vn530 Verizon Page Plus Snap on Hard Rubberized Faceplate Phone Cover Case Accessory Protector (check at Amazon)||0.0|
|Pink White Flower Lg Octane Vn530 Verizon Page Plus Snap on Hard Rubberized Faceplate Phone Cover Case Accessory Protector (check at Amazon)||0.0|
|New Puppies Lg Octane Vn530 Verizon Page Plus Snap on Hard Rubberized Faceplate Phone Cover Case Accessory Protector (check at Amazon)||0.0|
|BNY-WIRELESS XL SIZE IPHONE 5 LEATHER POUCH CASE WORKS WITH Otterbox / Lifeproof / Mophie Juice Pack Air/Plus Case On (check at Amazon)||0.0|
|Puppies Lg Octane Vn530 Verizon Page Plus Snap on Hard Rubberized Faceplate Phone Cover Case Accessory Protector (check at Amazon)||0.0|
|SPRAWL New Fashion Design Hard Skin Case Cover Shell for Mobile Phone Apple Iphone 6 Plus-- Bunnies on a Bicycle (check at Amazon)||0.0|
|@BNY-WIRELESS Camo Nylon Belt Clip Pouch For IPHONE 4 4S 4G Mophie Juice Pack Air/Plus Case On (check at Amazon)||0.0|
|Camo Adv Tree Mossy Oak Lg Octane Vn530 Verizon Page Plus Snap on Hard Rubberized Faceplate Phone Cover Case Accessory Protector (check at Amazon)||0.0|
|BNY-WIRELESS® XL SIZE IPHONE 5 LEATHER POUCH CASE WORKS WITH Otterbox / Lifeproof / Mophie Juice Pack Air/Plus Case On (check at Amazon)||0.0|
|Pink Blue 2d Owl Lg Octane Vn530 Verizon Page Plus Snap on Hard Rubberized Faceplate Phone Cover Case Accessory Protector (check at Amazon)||0.0|
|2d Black White Cute Owl Lg Octane Vn530 Verizon Page Plus Snap on Hard Rubberized Faceplate Phone Cover Case Accessory Protector (check at Amazon)||0.0|
|Camo Dry Deer Lg Octane Vn530 Verizon Page Plus Snap on Hard Rubberized Faceplate Phone Cover Case Accessory Protector (check at Amazon)||0.0|
|White Puppy Lg Octane Vn530 Verizon Page Plus Snap on Hard Rubberized Faceplate Phone Cover Case Accessory Protector (check at Amazon)||0.0|
|PANTECH EASE P2020 - Deer Snow and Mountain Sceen Hard Case, Cover, Snap On, Faceplate (check at Amazon)||0.0|
|XENTRIS 63011801XE Palm Pre /Pre Plus Snap-On Cover (Chrome) (check at Amazon)||0.0|
|Black Motion Plus Add-on Attachment for Nintendo Wii Remote (check at Amazon)||0.0|
|A Reiki Prosperity Attunement plus Subliminal Persuasion Programs to Increase Your Prosperity $21.95 (check at Amazon)||4.0|
|5 Vintage Oil Production & Industry Films (check at Amazon)||0.0|
|Interior Design Studio Special with Design Studio Plus Add-On Kits (check at Amazon)||0.0|
|The Elf on the Shelf: A Christmas Tradition (With Blue-eyed Elf Plus Elf on the Shelf Skirt) - Make your Elf on the Shelf a Girl (check at Amazon)||0.0|
|Cranium Puzzles Plus - Come on Down to the Country $85 (check at Amazon)||0.0|
|Manduka Mat Sling Plus Clip-On Accessory Pouch (check at Amazon)||0.0|
|Manduka Mat Sling Plus Clip-On Accessory Pouch, Sangria (check at Amazon)||0.0|
|Spiced Pumpkin - Home Fragrance Base Unit Plus 1 Scented Oil Yankee Candle (check at Amazon)||0.0|
|1" Light Gray Sew On Hook and Loop - 5 Yds of Hook and 5 Yds of Loop Per Package 5 Yd $12.51 (check at Amazon)||0.0|
|19"x10" - Flashing Motion 99C & Plus SIGN, On/Off Switch (check at Amazon)||0.0|
|Palm Pre / Pre Plus Snap-On Case - Pink (check at Amazon)||0.0|
|NaturVet Ear Wash Plus Tea Tree Oil for Dogs and Cats, Liquid, Made in USA (check at Amazon)||0.0|
|Sentry PurrScriptions Plus Squeeze-On Flea and Tick Control for Cats and Kittens (check at Amazon)||0.0|
|Liberty Plus IGR Spot On Flea and Tick Medication for Dogs (check at Amazon)||0.0|
|The Original Tea Tree Oil Products for Dogs (check at Amazon)||0.0|
|Lintbells YuMEGA Plus, Itchy Dog Oil, 250 mL (check at Amazon)||0.0|
|Lintbells YuMEGA Plus, Itchy Dog Oil, 500 mL (check at Amazon)||0.0|
|Fiproguard Plus Squeeze On 22 lbs (check at Amazon)||0.0|
|Sentry PurrScriptions Plus Squeeze-On (check at Amazon)||0.0|
|EmuDog Plus Dog Emu Oil for Advanced Skin Healing (check at Amazon)||0.0|
|Frontline Plus Spot-On Treatment For Dogs 23 to 44 Lbs. - 6-Month (check at Amazon)||0.0|
|OmniTrol Spot-On Flea and Tick Treatment Plus IGR for Medium and Large Dogs (check at Amazon)||0.0|
|HAIR TAMER PLUS SPRAY ON 12 OZ TOMLYN PRODUCTS TO06251 (check at Amazon)||0.0|
OPEC Plus Agrees on Oil Production Increase, Easing Pressure on Supplies and Prices have 2608 words, post on www.nytimes.com at July 18, 2021. This is cached page on USA Breaking News. If you want remove this page, please contact us.