Global: OPEC+ confirms August supply increase, next move uncertain

While the OPEC+ coalition agreed on an increase in supply that complements the dwindling oil production during the pandemic, it postponed the talks for the next move and agreed to increase oil supply by 648K barrels per day in August. However, the fact that many member countries will not be able to participate in the new increase in supply makes the decision largely symbolic.

Brent oil and Ural oil price comparison… Source: Bloomberg

In recent months, OPEC+ has produced less oil than planned. Only Saudi Arabia and the United Arab Emirates have significant spare capacity that can be rapidly increased. Many other members have been struggling to meet their production targets for months. It is unclear how much Saudi Arabia and the UAE are willing to increase production. Official data point to a daily reserve production capacity of 3 million barrels between the two countries. While the danger of recession arises in the global economy, the US wants the big players of OPEC to increase the supply. Increased production from Middle Eastern producers could also help Biden’s plan to limit Russian oil revenues. However, Russia is still in an advantageous position with its discounted Ural oil sales. As you can see in the chart, although Ural oil and Brent oil maintained a narrow spread until February, the spread expanded by more than $30 after the war.

Kaynak Tera Yatırım
Hibya Haber Ajansı