Opec and its allies hope they can stick to their existing oil production plan, and will resist calls to curb rising global energy prices to protect the economic recovery when they meet later Monday.
The oil producer group, which has been cooperating with Russia and other countries under the Opec + banner since 2016, agreed this summer to add 400,000 barrels per day production per month to the end of 2022.
But as oil prices traded near a three-year high of $ 80 a barrel, and other energy products, such as natural gas rising to a record level well above the equivalent oil price, the group came under pressure from the US and others to increase production at a faster rate.
The decision could still follow both directions at Monday’s meeting, but people close to the talks said Saudi Arabia – the group’s de facto leader – and other members generally wanted to stick to the existing plan, claiming that oil prices have not risen significantly in recent months, even while other energy commodities have risen.
The group also wants to appear stable and consistent in its decision-making, giving long-term guidance to the oil market, rather than increasing production increases, which may have to reverse if the pandemic leads to renewed restrictions or closures affecting demand in winter.
“While the group is undoubtedly under pressure, the most likely way for them to stick to the plan is,” said Amrita Sen at Energy Aspects, a consultant. ‘The group wants to indicate stability to the market and a clear path for production.
Opec + agreed on record-breaking production cuts last year when demand for oil fell sharply at the peak of closures in the western world. But last week, investment firm Goldman Sachs warned that global crude stocks were shrinking at a record pace.
US shale producers also warned that the oil market could not rely on them to increase production quickly this time around, with the majority of companies experiencing pressure from investors to remain cautious after last year’s price crash.
Traders and analysts say there is still some caution ahead of the meeting, as a further boost to production cannot be ruled out, given the pressure the group has experienced, particularly from the White House.
An energy crisis caused by a tight supply of natural gas and coal, which has hit Europe but also increasingly in Asia, including major oil-consuming economies such as China and India, makes the decision even more difficult for the group.
The United Arab Emirates, a close ally of Saudi Arabia, is stronger than some members in increasing production faster, according to people briefed on pre-meeting discussions.
“If Opec + now decides to increase production by only 400 000 b / d in November, geopolitics will almost seem reckless,” says Bjarne Schieldrop, chief product analyst at BEE in Norway.
“The result [will be] that oil prices will rise even higher in a situation where energy consumers around the world are already experiencing high pain due to record high coal and natural gas prices.
One option could be to highlight the production increases planned for later this year, such as increasing production by 800,000 b / d in November, but then interrupting it next month.
Brent crude, the international benchmark, rose 0.25% on Monday at $ 79.50 a barrel, just below the three-year high of $ 80.75 a barrel it reached last week.
U.S. benchmark West Texas Intermediate rose 0.1% at $ 75.97 a barrel.