OPEC + meeting on Wednesday on the strategy to be carried out
The OPEC + countries must decide on Wednesday what to do with their current agreement. The negotiations will be conducted under the leadership of Kuwaiti Haitham Al-Ghais, who succeeds Nigerian Mohammed Barkindo who died in early July.
Described as a “respected oil technocrat and a well-known OPEC figure”, the latter took office as secretary general on Monday.
Biden push to increase production
After reducing its production in the spring of 2020 to cope with the drop in demand generated by the restrictive measures taken to combat Covid 19, the alliance has in theory returned to its production levels before the health crisis.
But that doesn’t seem to be enough to stem the price spike. This motivates the pressure from Washington, so that OPEC + increases its “effort”.
In mid-July, the American president traveled to Saudi Arabia to discuss the subject, “forgetting his promises” to treat the country as a “pariah” after the 2018 assassination of journalist Jamal Khashoggi.
Uncertainty over OPEC+ strategy
At present, the strategy that OPEC+ will choose to follow is not yet very clear. If the US administration seems to anticipate good news, it is difficult to know if this follows guarantees that Biden would have obtained during his stay.
Some analysts believe it is likely that the Saudis will announce a breakthrough that the White House tenant can brand as a victory with his constituents.
The London research institute Energy Aspects, for its part, specifies that OPEC + should extend the current agreement to continue to increase its volume of oil. A decision that must be taken unanimously by the members and therefore augurs long negotiations.
No major increase in volume to be expected
However, analysts do not expect a sharp increase in production volume, relying on the fact that OPEC + remains in line with its current policy.
Because the member countries of the cartel and their associates must also take into account the interests of Moscow, at the antipodes of those of Washington.
Russia actually has every interest in reducing the supply available on the markets so that prices soar. His objective: to finance the war he is waging against Ukraine via the oil windfall.
Biden meanwhile wants to reduce inflation and soaring fuel prices, to preserve both the economy of the United States … and its electorate.
Some experts also believe that the announcement of greater “generosity” from OPEC+ could raise doubts in the markets as to its reliability, as the alliance is already subject to strong internal constraints. . It is not uncommon to see its members having some difficulty filling their quotas and reaching pre-Covid volumes.
Our opinion, by leblogauto.com
A balancing act therefore for OPEC+, which must at the same time allow the United States – and especially Biden – to save face… while sparing Russia, under penalty of calling into question the very existence of the ‘alliance. Putin could decide to slam the door if his demands were not sufficiently taken into account.
Balancing game also between produce more to lower prices but making sure to do not lose value …
Sources : AFP, OPEP
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