Crude oil prices could rise further if OPEC+ stops adding barrels to global supply, which is a possibility after the cartel's next meeting, according to the Kuwaiti oil minister.
"The markets are slowing. Since COVID-19 has begun its fourth wave in some areas, we must be careful and reconsider this increase. There may be a halt to the 400,000 (bpd) increase," said Mohammad Abdulatif al-Fares, as quoted by Reuters.
OPEC+ had agreed to boost oil production by 400,000 bpd every month beginning August until the group's combined output reached pre-agreement levels towards the end of next year. But now that demand concerns are once again coming to the fore, OPEC+ is signaling that it is always ready to change tack.
It's worth noting that the Kuwaiti minister's comments come soon after U.S. President Joe Biden called on OPEC+ to boost production by more than 400,000 bpd to offset strongly rising fuel demand in the world's top consumer that led to a sharp rise of prices at the pump.
"There are meetings with OPEC countries, especially the Gulf Cooperation Council countries, and so far there are different views on how to handle this issue," Mohammad Abdulatif al-Fares told Reuters when asked about this call.
"Competitive energy markets will ensure reliable and stable energy supplies, and OPEC+ must do more to support the recovery," White House National Security Advisor Jake Sullivan said in a statement earlier this month, in what was one of the first direct calls from the Biden administration on the OPEC+ alliance. "Higher gasoline costs, if left unchecked, risk harming the ongoing global recovery," he added.
Different opinions about how to respond to this call, however, are understandable. President Biden has prioritized emissions-cutting and a switch from gasoline-powered to electric cars that would diminish the demand for oil. In the context of his administration's quest against the fossil fuel industry, a call for more oil sounds not a little confusing. Yet if OPEC does indeed reconsider its cuts at its meeting on Wednesday, there will likely be more calls.
By Irina Slav for Oilprice.com
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OPEC+ will probably agree in its meeting on 1 September 2021 to maintain its production cuts at current levels as agreed last month in view of remaining concerns of a surge in COVID cases in Asia.
Still, the fact that China has announced no new cases of COVID has again created a momentum and confidence in global oil demand leading to expectations that oil prices are on their way to recovering al their losses in the last two weeks and resuming their surge again. They will be aided for a short while by hurricane Ida affecting US production in the Gulf of Mexico.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business