OPEC+ Deal Drives Oil Prices to Three-Year HighBy Antonio Trujillo | Thu, 10/07/2021 - 10:56
OPEC+ country officials and delegates have announced their intentions to keep increasing production, amidst a worldwide surge in demand.
OPEC+, composed of the world’s largest oil producers plus some of their allies, announced Monday following a meeting that they were continuing and sticking with their plan to gradually increase oil output, the so-called “measured steps,” a move that sent oil prices to a three-year high. The amount in question involves an additional 400 thousand barrels each month throughout the next year, until at least the month of April.
For instance, West Texas Intermediate crude went in the market for US$78.13, a 3 percent increase. Brent, on the other hand, for US$81.77 a barrel, a tad more than 3 percent. These prices had experts wondering whether the international organization would lift production even more. OPEC+ nonetheless announced their intentions to stick to their planned production lift, which seeks to reach pre-pandemic levels.
Previously, OPEC countries, plus Russia, have faced severe backlash and criticism from big consumer countries, especially the US and India, pointing out to more than 50 percent surge in oil prices as a result of economic recovery. Regardless, OPEC+ “reconfirmed the production adjustment plan,” said the group in a statement.
When asked about these pressures to ramp up production, a spokesperson for OPEC+ said they “are scared of the fourth wave of corona; no one wants to make any big moves.” Overall, , demand has increased steadily, while supply has suffered from disruptions by factors as varied as hurricanes that have greatly affected production in the US, and also low levels of investments across the sector, attributed to governments spending resources , and money on other important factors such as healthcare.
These shortages, say experts, have contributed to high prices seen in the last weeks and months and also, to a higher demand in natural gas, which has seen an increased demand too. In order to cope with it and its low supply, some countries are turning to alternatives to power their populations. For instance, the Saudi Arabian Oil Co. has anticipated a temporary shift from natural gas to oil in some power generation. In the case of the US, Mike Muller, head of department Vitol, has said that “control of pricing is very much in the hands of OPEC+.”