Oil prices are at a seven-year high as OPEC and its allies stick to a modest increase.
Oil prices hit their highest levels since 2014, as officials from OPEC, Russia and other oil producers decided on Monday to stick to their previous agreement to add only gradually. of oil on the market. The announcement came despite growing demand for energy as businesses around the world resumed operations.
The 23-member group, known as OPEC Plus, said in a terse press release that it would increase production by a modest 400,000 barrels per day in November, less than 0.5% of the global demand, under an agreement reached in July.
Indeed, the group ignored political and trade pressures to increase oil production in order to ease the tightening of the market.
“Oil prices will have to stay above $ 80 a barrel for a while or rise sharply” for the Organization of the Petroleum Exporting Countries to consider changing its plan, said Richard Bronze, head of the oil industry. geopolitics at Energy Aspects, a research firm. .
Oil prices have soared on the news. West Texas Intermediate, the US standard, jumped to around $ 78 per barrel, its highest level since late 2014, while Brent crude, the international benchmark, rose nearly 3% to $ 81.56 per barrel . Oil prices have more than doubled in a year.
So far, analysts say, recent increases in the price of oil have not been enough to deviate OPEC Plus from July’s path. In addition, prices at these levels are probably a pleasant surprise for oil producers.
“There are gusts around, but they don’t want to rock the boat,” said Bhushan Bahree, senior director of IHS Markit, a research firm.
OPEC Plus has done little to explain its reasoning. The group said it was “acting in view of the current fundamentals of the oil market.”
Analysts say the group is more cautious about its outlook than some industry watchers who see demand for oil far outstripping supply in the coming months. Oil consumption has rebounded sharply after falling 9% last year, but the pandemic remains a concern in major oil-consuming countries, including the United States.
With oil prices picking up, OPEC and its allies likely saw no reason to reopen the deal reached during long and difficult negotiations in July. This agreement provides for a gradual increase in monthly production of 400,000 barrels per day until next year.
OPEC Plus plans to meet monthly to review the plan in case it needs to be adjusted.
A change of course could have met with opposition, and it could have paved the way for new negotiations on quotas of producers who would like higher caps – which Prince Abdulaziz bin Salman, the Saudi oil minister , who runs these meetings, most likely wished to avoid.
On the other hand, the pressures to open the taps are increasing. Signs of distress are appearing in the energy markets.
Already a global crisis in natural gas – a key fuel for generating electricity – threatens to affect oil prices. UK consumers have faced days of disruption due to a fuel shortage caused by a lack of tanker drivers.
The damage caused by Hurricane Ida in August to oil and gas infrastructure in the Gulf of Mexico offset some of the impact of recent OPEC Plus production increases.
A price hike to $ 90 a barrel or more could throw cold water on oil demand and spark a political backlash, including from the United States, some analysts say.
OPEC Plus could face stronger calls for bigger increases at the group’s next meeting, which is scheduled for November 4.