The Organisation of the Petroleum Exporting Countries and its allies (Opec ) offered only a token supply increase and signalled that its powers to help are limited.
NEW YORK: US president Joe Biden returned from Saudi Arabia last month confident that his visit had yielded a promise to cool oil prices.
But on Wednesday, the Organisation of the Petroleum Exporting Countries and its allies (Opec+) offered only a token supply increase and signalled that its powers to help are limited.
The “further steps” from the Saudis on oil production the White House had predicted after Biden’s reconciliatory fist bump with Crown Prince Mohammad bin Salman turned out to be one of the smallest hikes in Opec’s six-decade history – 100,000 barrels a day extra in September from the group and its allies.
Such a small amount, just 1/1000th of global demand, offers little respite for consumers suffering the inflationary squeeze of oil prices and scant reward for the president’s diplomatic efforts.
Explaining their rationale after their meeting, Opec+ highlighted a fundamental problem that explains why crude remains near US$100 (RM445) a barrel in London.
Idle supplies in the Middle East are down to “razor-thin” levels of about two million barrels a day, or 2% of world demand, according to the International Energy Agency.
This “severely limited” spare production capacity should only be used with “great caution in response to severe supply disruptions,” Opec+ said in a statement.
Unwilling or unable to significantly boost production, Opec+ ended up offering next to nothing. “Today’s decision will feed the narrative that there is little left in the Opec+ tank,” said Helima Croft, chief strategist at RBC Capital Markets LLC.
Biden administration officials said they were satisfied with the decision for September because Opec+ already fast-tracked supply increases in July and August.
The Saudis pumped 10.78 million barrels a day last month, according to a Bloomberg survey, a level reached only on rare occasions.
“At the end of the day, we’re not looking at numbers of barrels,” Amos Hochstein, the State Department’s senior adviser for global energy security, said in an interview in Washington. — Bloomberg
