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The largest oil producers in the world will gather on Wednesday to make a critical decision over oil prices how much oil they will add to the market starting in September.
It comes shortly after US Vice President Joe Biden visited Saudi Arabia in an effort to personally persuade the nation to pump additional barrels in order to help lower skyrocketing costs.
Since February, crude has routinely traded at or above $100 per barrel, increasing the cost of living in many nations.
The 13 core members of the Organization of Petroleum Exporting Countries (Opec) are expected to decide to increase oil supplies, according to the White House. But it’s not a given that
Opec was established in 1960 as a cartel with the intention of controlling the price and supply of oil globally.
President Biden stated that he anticipates supply to rise after meeting with Saudi Crown Prince Mohammed Bin Salman, the cartel’s largest producer. Saudi Arabian officials have emphasized that any decision to raise supplies would be made after consulting Opec+.
Russia is a member of Opec+, a larger group of 23 oil-exporting nations that meets monthly in Vienna to decide how much crude oil to sell on the international market.
What might lower oil prices?
Opec+ started a series of cuts back in April 2020 that persisted as demand decreased throughout the coronavirus epidemic. It has been gradually rebuilding this depleted supply since 2021.
At their most recent meeting, Opec+ voted to slightly boost their production of barrels for the month of August. However, it might not be so simple to simply turn the faucets on full. On paper, several cartel members, including Angola, Nigeria, and Malaysia, are already having trouble achieving their current monthly supply targets.
Due to western sanctions, Russian shipments have also decreased. Meanwhile, Moscow has increased its supplies to clients in Asia, including China and India.
The only two big participants with some extra capacity are the lynchpin Saudi Arabia and its neighbor, the United Arab Emirates. However, Saudi Arabia’s production goal for August is 11 million barrels per day, which energy analysts believe is already at an extremely high level and leaves little possibility for further rises.
Uncertainty over the demand for energy in the upcoming months, though, might have more of an impact on the couple’s choice.
The conflict in Ukraine, rising interest rates, and the impending recession in many western nations might all significantly reduce demand. According to experts, these elements can make the group cautious and reticent to significantly raise their performance.
Russia, behind the US and Saudi Arabia, was the third-largest oil producer in the world prior to the invasion of Ukraine. It makes up roughly 8–10% of the world’s oil supply.
According to market analysts, President Vladimir Putin wants to keep oil prices high in order to continue funding the conflict in the Ukraine and fend off the effects of severe western economic sanctions.
Saudi Arabia prioritizes the Opec+ group’s unity and will refrain from taking any actions that can compromise it.
What does the future hold for oil prices?
Even though it will grow more slowly than it did this year, Opec itself predicts that the world’s demand for oil will increase in 2023. According to its analysts, this will be influenced by developments in the fight against the coronavirus in China.
In the meantime, estimates from the US Energy Information Administration and the International Energy Agency indicate that oil demand will continue to rise sharply, despite mounting concerns about inflation in numerous nations and slowing economic growth.
Given capacity restrictions and the lack of investment in downstream and refining, oil producers may be forced to pump oil at a rate that is faster than it has been in the previous five years in order to balance supply and demand.
Ben Cahill, a senior associate at the Centre for Strategic and International Studies in Washington, claims that although there is a lot of market volatility, few people see a persistent decline in oil prices below $100.
This year, American gas prices have already surpassed a 13-year high.
As part of its strategy to add 180 million barrels to the market over a six-month period ending at the end of October, the US has been releasing around a million barrels per day from its Strategic Petroleum Reserve (SPR) since April.
