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The price of oil has skyrocketed following Russia’s invasion of Ukraine.
After numerous refusals, the main oil exporting countries and their allies (known as OPEC +) decided this Thursday to double their production in the summer months, amid strong pressure from record oil prices following Russia’s invasion of Ukraine.
At a meeting in London, OPEC+, which includes Russia, announced that it will produce 648,000 barrels per day in July and August, 50% more than initially forecast for those dates.
The world’s big oil producers had cut their production following the coronavirus pandemic, which led to a drop in prices.
However, following the Russian invasion of Ukraine and numerous sanctions imposed by the West on Moscow, oil prices soared to more than $100 a barrel, the highest in nearly a decade.
OPEC, whose de facto leader is Saudi Arabia, had for months resisted pressure from the US, UK and other nations to increase oil supplies more quickly.
Officials from the Joe Biden administration recently visited Saudi Arabia to discuss, among other issues, energy supplies and the US president himself is expected to visit Riyadh later this month following years of cooling relations due to the assassination by the Saudi intelligence of journalist Jamal Khashoggi.
In a statement on Twitter, the White House said it “welcomes” the announcement of the production increase.
“The United States will continue to use every tool at our disposal to address energy price pressures,” Biden press secretary Karine Jean-Pierre said.
However, OPEC+’s decision did not seem to alleviate concerns regarding supply shortages, and oil prices on the market rose further following the announcement, although they fell slightly followingwards.
Brent crude, the international benchmark, was trading at US$116 a barrel on Thursday followingnoon following opening the day one dollar higher.
The causes
In the announcement, the organization and its allies did not mention the war in Ukraine as the cause for the production increase, in what was seen as an attempt not to upset Russia.
Instead, the statement assured that the decision is due to the reopenings in the “major world economic centers” following the quarantines due to the coronavirus pandemic and the end of seasonal maintenance work in refineries.
image source, Getty Images
OPEC+ is a group of 23 oil-exporting countries that meets every month in Vienna, Austria, to decide how many barrels of crude to inject into the world market.
At the center of this group are the 13 members of OPEC (Organization of Petroleum Exporting Countries), which are primarily Middle Eastern and African nations, plus Venezuela.
It was formed in 1960 as a cartel, with the aim of fixing the world supply of oil and thus controlling its price.
Currently, the OPEC countries produce regarding 30% of the world’s crude oil, regarding 28 million barrels per day.
The largest single producer of oil within OPEC is Saudi Arabia, which produces more than 10 million barrels of crude a day.
In 2016, when oil prices were particularly low, OPEC joined forces with 10 non-OPEC oil producers to create OPEC+.
The largest single producer in this second group is Russia, which pumps slightly more than Saudi Arabia.
Together, these nations produce regarding 40% of all the world’s crude oil.
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