OPEC opts against sharp increase in production, pushing oil prices to their highest level in seven years

Instead, the Organization of the Petroleum Exporting Countries and Russia said the group, which calls itself OPEC +, would increase its collective production by 400,000 barrels per day in monthly installments, as part of a previously planned plan. agreed to bring production back to pre-Covid-19 levels. .

Early last year, the two groups abandoned a price war that had weakened prices and sharply reduced their combined output, as the coronavirus shut down economies and depressed demand for crude. As economies began to reopen, OPEC + began to put that oil back on the market. More recently, it agreed to add around 400,000 barrels of crude per day each month, seeking to bring production back to pre-Covid-19 levels by next year.

The rise in oil prices comes against a backdrop of a rapid return in demand. Economies have started to buzz again after near-hibernation during some of the worst times of the pandemic. Natural gas prices have also skyrocketed due to higher demand and low inventories in the United States and Europe. High coal and gas prices and government efforts to reduce electricity consumption have resulted in power cuts in China.

The shortages have contributed to the rise in oil prices, analysts said. Some of the gas-fired power plants in the world may switch to using crude oil. While it is too early to tell if some have done so in large numbers, markets are anticipating an increase in demand for crude.

Saudi Arabian Oil Co. has predicted that a temporary switch from natural gas to oil in some power generation could add 500,000 barrels per day to oil demand.

Meanwhile, the American frackers, who normally increase production when prices rise, have instead limited their spending. The lack of an increase in US supplies so far means that “price controls are largely in the hands of OPEC +,” said Mike Muller, head of Asia for the trading giant. raw materials Vitol, during a webinar hosted by Dubai-based consulting firm Gulf on Sunday. Intelligence.

At a technical meeting last week to prepare for Monday’s meeting, OPEC economists told delegates the group could face an oversupply by the end of the year. A document prepared by the secretariat, consulted by the Wall Street Journal, predicted that the oil markets could be in surplus as early as December.

Write to Benoit Faucon at [email protected] and Summer Said at [email protected]