The OPEC+ meeting has ended with rather disappointing news for those that were hoping for a surprise increase in oil production. The group has agreed to keep the production plans unchanged—adding back 400,000 bpd in November.
That was the original plan, but oil prices have been on the rise, and a gas crunch in Europe and in Asia, and pleas from the United States had given the market hope that OPEC+ may consider adding even more production back into the quota for the month of November.
But a quick 25-minute JMMC meeting ended the conjecture, according to sources.
Oil prices climbed on the news.
WTI was trading at $77.68 at 9:56 a.m., moments after the OPEC+ was released. This is a 2.37% increase on the day or $1.80 per barrel. Brent was trading up 2.5% (+$1.98), at $81.26—comfortably above the psychological $80 per barrel mark.
The price spike is a fair indication that OPEC+ is for now in control of market prices—and U.S. shale’s day in charge has ended.
OPEC+ decided in the middle of July that it would start returning 400,000 bpd to the market every month beginning in August until it unwinds all the 5.8 million bpd cuts. The group agreed to extend the existing deal from April 2020 through the end of December 2022.
And it looks like that deal, for now, will stand.
The other option that the group was considering was an 800,000 bpd increase in November, followed by no increase in December. This would not have changed the overall amount produced from what was planned, but would have pushed up the timeframe for adding in more barrels.
By Julianne Geiger for Oilprice.com
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Moreover, OPEC+ may not want Brent crude price to fall below $80 a barrel which is the price the overwhelming majority of its members with the exception of Russia need as a minimum to balance their budgets.
OPEC+ may only agree to increase production beyond the already agreed 400,000 barrels a day (b/d) in November if Brent crude goes much higher above $80.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London