On Monday, oil prices soared to the highest point in several years. This news comes as OPEC (Organization of the Petroleum Exporting Countries) and various allies are maintaining their current strategy of a gradual increase in oil supply, rather than increasing global output as requested by consumers.
“By 8:45 AM ET (1245 GMT), U.S. crude futures were up 1.7% at $77.17 a barrel, climbing to a new seven-year high, while Brent futures were up 1.9% at $80.81 a barrel, surging above $80 again,” explained Investing.com.
According to the outlet, ministers from OPEC+ (OPEC, Russia, and other allies) are “due to meet online later Monday, with the market eagerly awaiting to see whether they decide to go beyond the existing deal to add 400,000 barrels per day to supply every month until at least April 2022.”
The United States (the largest consumer in the world) and India (the third largest consumer in the world) are among those putting pressure on OPEC+ to increase oil supply to the global market in order to reduce prices.
“Energy shortages in China and Europe ahead of the winter have led to discussion on increasing crude oil supply by more than the currently agreed monthly increment of 400Mbbls/d – a one-time increment of 600Mbbls/d or even 800Mbbls/d for November remains on the table to fill the supply gap,” said a note from analysts at ING.
As The Wall Street Journal explained, “The rally in oil prices comes amid a backdrop of fast-returning demand.”
“Economies have started humming again after near-hibernation during some of the worst periods of the pandemic. Natural-gas prices, too, have soared on higher demand and low inventories in the U.S. and Europe,” the Wall Street Journal continued. “High coal and gas prices and government efforts to cut electricity use have led to power cuts in China.”
“With this decision OPEC+ appears content to see oil prices drift higher despite concerns about a deepening energy crisis in Europe and Asia,” said Helima Croft, head of global commodity strategy at RBC Capital Markets, as reported by the Financial Times. “The question for the Biden administration is now whether it wants to make further calls on Saudi Arabia to do more to help dampen down prices.”
The current members of OPEC are Algeria, Angola, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, the Republic of the Congo, Saudi Arabia, the United Arab Emirates, and Venezuela. Additional members of OPEC+ are Russia, Azerbaijan, Bahrain, Brunei, Kazakhstan, Malaysia, Mexico, Oman, South Sudan, and Sudan.
Saudi Arabia is the largest producer among OPEC members, producing over 10 million petroleum barrels per day as of 2016 data. One petroleum barrel is equivalent to approximately 42 U.S. gallons.
Based on data from the U.S. Energy Information Administration, OPEC represented 44 percent of the world’s oil production in 2016, and 81.5 percent of the world’s “proven” oil reserves.
According to energy watchdog, the International Energy Agency, more than three-quarters of global energy demand is still met by fossil fuels.