Grant Smith, Bloomberg News
LONDON
EnergiesNet.com 08 10 2022
OPEC’s latest supply increase seemed too small to satisfy anyone when it was unveiled last week, but it’s increasingly looking like the right call.
At just 100,000 barrels a day — or 0.1% of global output — the hike announced by Saudi Arabia and its partners appeared pointless or, worse still, a deliberate snub to US President Joe Biden following his trip to the kingdom and calls for additional barrels.
The Organization of Petroleum Exporting Countries and its partners explained that they had to use their “severely limited” spare capacity with “great caution.” Subsequent developments are vindicating their decision.
“The latest agreement is actually a fair deal,” Francesco Martoccia, an analyst at Citigroup Inc., said in a report.
International oil futures have sunk 5% this month, with Brent trading near $95 a barrel amid a lackluster holiday driving season in the US and growing fears over a global economic slowdown.
The price pullback has been sufficient to give American drivers some respite and partly placate the White House, whereas a more substantial OPEC+ boost would likely have deepened the selloff — crimping revenues for the group’s 23 members.
“The numbers didn’t look good — once upon a time there might even have been calls for a cut,” said Paul Horsnell, head of commodities research at Standard Chartered Plc. “The decision was a glance at the downside, and a greater concern with prices going to $80 rather than $120. So 100,000 barrels fitted well, given the constraints.”
Meanwhile, the energy crisis triggered by Russia’s invasion of Ukraine has intensified, with flows of Russian crude to eastern Europe halted last week over unpaid transit fees.
The disruption has illustrated that the havoc posed by Moscow’s aggression is only just beginning, and demonstrates why Saudi Energy Minister Prince Abdulaziz bin Salman and his colleagues may have been right to keep their diminished trove of spare barrels in reserve for the time being.
“The market is going to tighten up very, very quickly” this winter, said Amrita Sen, chief oil analyst at consultant Energy Aspects.
bloomberg.com 08 09 2022
