Opec+ to increase output by 400,000 bpd despite US pressure for more oil supply

Opec+, the oil exporters bloc behind historic production cuts, agreed to increase output by 400,000 barrels per day in December and will not meet demands from the US to bring on additional supply.

The group, headed by Saudi Arabia and Russia, stuck to its earlier agreement to bring a total supply of 2 million bpd back to markets by the end of the year.

Opec+ said it was reconfirming “the production adjustment plan and the monthly production adjustment mechanism approved at the 19th Opec and non-Opec ministerial meeting and the decision to adjust upwards the monthly overall production by 400,000 bpd for the month of December 2021".

The group also made provisions for countries that produced above their quota to put forward plans to make compensatory cuts by the end of December.

Oil prices rose in response to the group's latest plans to moderately increase supply. Brent, the international benchmark for crude, rose 0.76 per cent to reach $82.61 per barrel at 6.53pm UAE time. West Texas Intermediate, which tracks US crude grades, rose 0.33 per cent to trade at $81.13 per barrel.

Brent prices are trading at three-year highs, while the US benchmark surged to seven-year highs in recent weeks, in response to tighter market fundamentals, underpinned by growing economic activity so far this year.

“Prices are rising as the market expects a moderate supply increase instead of an acquiescence to calls by the US and other oil producers to bring on more supply sooner,” said Louise Dickson, senior oil markets analyst at Rystad Energy.

“The current demand-supply mismatch has pushed oil prices above $80 per barrel [for] Brent for more than a month, which has been a short-term boon for Opec+ producers but a pain for consumers, in particular, countries worried about inflation and post-pandemic economic growth.”

The next Opec+ meeting will be held on December 2.

Opec+ came under pressure from Washington, with US Energy Secretary Jennifer Granholm blaming the alliance for the recent surge in higher oil prices.

US President Joe Biden has also called on the group to do more to contain the rally in commodity prices.

“I do think that the idea that Russia and Saudi Arabia and other major producers are not going to pump more oil so people can have gasoline to get to and from work, for example, is not, is not, right,” Mr Biden told reporters after the G20 summit in Rome earlier this week.

Prince Abdulaziz bin Salman, Saudi Arabia's energy minister, said the group was having “discussions at all levels” with the US.

“We still believe that what we are doing is the right job and the most convenient job,” he told reporters following the Opec+ meeting.

The Opec+ decision leaves the US disappointed, but accepting of the outcome, said Ann-Louise Hittle, vice president of macro oils at Wood Mackenzie.

“This will be seen as disappointing by the US, which is asking for an extra increase closer to 600,000 bpd,” she said.

Oil-importing nations have also called on Opec+ to raise supply to offset the pressure of higher commodity prices on consumers.

The group is working with key importers to ensure the recovery from the Covid-19 pandemic is smooth for all economies, Suhail Al Mazrouei, the UAE's Energy and Infrastructure Minister, said after the meeting.

“We [are working] with them to move to a smooth recovery after the pandemic. So it's really crucial for us as global producers to do the right measures, addressing the concerns that we have received from many of the countries,” he told reporters.

Sticking to the current increment of 400,000 bpd is the most viable solution towards ensuring “the balance of the supply and demand and towards a smooth recovery of the world economy”, he added.