The Organization of the Petroleum Exporting Countries (OPEC) and its allies (OPEC+) confirmed on Monday (Sept. 4) they will increase monthly overall production of oil by 400,000 barrels per day (bpd) for the month of November, despite pressure from consumers for more crude and surging prices.
The amount is significantly lower compared to the 800,000 bpd output hike that had been reported earlier by various media outlets.
In July, the cartel agreed to increase monthly production by 400,000 barrels per day (bpd) until at least April 2022 and phase out existing reductions of 5.8 million barrels.
Brent crude, the international benchmark, rallied above $81 a barrel, the highest it has been since late 2018 on the news that the group stuck to the existing deal and adding to inflationary pressures in the world economy. Brent crude prices have risen 50% so far this year. West Texas Intermediate (WTI) surged more than 2% to near $78 a barrel, hitting the highest in more than 7 years.
“Given the demand picture and the outcome of the OPEC meeting, the overall sentiment around crude is bullish,” John Kilduff, partner at Again Capital LLC in New York told Reuters.
Meanwhile, three of the world’s biggest oil traders, Vitol, Gunvor and Trafigura split on oil prices. Vitol Chief Executive Russell Hardy told the Energy Intelligence Forum he expected the price to ease to about $75 a barrel by this time next year, citing inflation concerns. Gunvor CEO Torbjorn Tornqvist told the conference: “I believe we’ll have Iran as a supply sometime in the next year so I would have to say oil will be around $85.” Trafigura gave the highest forecast of $90 a barrel, according to Reuters.
The oil price rally has also been fuelled by an even bigger increase in natural gas prices, particularly in Europe, which have spiked since the start of the year due to a combination of low inventories, low supplies and higher Asian demand.
The European natural gas winter season started Oct 1. Inventories are well below the 10-year seasonal range . European benchmark natural gas prices at the Dutch TTF hub are at all-time highs, up nearly 400% since January. Some contracts are near 100 euros ($116) per megawatt hour (Mwh), prompting switching to fuel oil and other crude products to generate electricity and for other industrial needs.
The OPEC meeting finished in record 25 minutes. The next meeting will take place on November.
4. Till then, “we will be monitoring the situation, as we know, demand usually falls in the fourth quarter,” Russian Deputy Prime Minister Alexander Novak said after the meeting.
