An ambition to provide the global oil market with clear guidance on future production plans and discipline in sticking to already agreed policies is the reason OPEC+ did not respond to U.S. calls to boost oil production, Russia’s Deputy PM and top OPEC+ negotiator Alexander Novak said.
In an interview with news outlet RBC, Novak explained that it was more important for the extended cartel to indicate how much oil it will be producing in the medium term as demand increases rather than boosting output in the near term in response to a large consumer’s call.
“We cannot secure fluctuating production,” Novak said. “Oil production companies must plan their investments ahead of time in order to secure production growth,” he added, noting that during the winter, there is usually a decline in the demand for oil.
‘For some reason,” the official said, “The U.S. is not asking its own shale oil companies to boost production, which has fallen considerably over the last two years. On the contrary, they are deliberately reducing their production. I believe there is a certain contradiction in these actions.”
U.S. President Joe Biden called on OPEC+ repeatedly to boost production by more than 400,000 bpd because prices at the pump were becoming too high for American drivers. When the calls failed to produce a response, Biden blamed OPEC+ for hurting poor working American families. This failed to work, too, which is when the Biden administration announced a release of up to 50 million barrels from the strategic petroleum reserve.
The news has served to moderate prices, especially as it coincided with the news of the emergence of the omicron variant, which prompted worry about new movement restrictions that would, as usual, hurt oil demand.
Novak, like many observers, downplayed the effect of the SPR release along with the planned releases of other countries.
“Plans are for a total release of 50-60 million barrels,” he told RBC. “Of this, the U.S. will release about 30 million barrels in January and February. But the world consumes 36 billion barrels annually,” he explained, noting that in this context, the release of 50 or 60 million barrels will have only a temporary effect.
By Irina Slav for Oilprice.com
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And to retain the market’s confidence in it, OPEC+ exercised discipline in sticking to already agreed policies. It also wanted to tell the United States that with its strong cohesion and growing confidence it can’t be pushed around anymore particularly that its leaders Russia and Saudi Arabia are reading from the same hymn book.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London