OPEC's small raise in oil output described as an 'insult' to Biden
OPEC+ has agreed to raise the oil output to minimal levels in a rebuff to Biden.
The OPEC+ cartel agreed today to produce 100,000 more barrels per day for the month of September, an increase that is the equivalent to 86 seconds of global oil demand, a move described by many analysts as an insult to US President Joe Biden.
“That is so small as to be meaningless. It is a minor blip from a physical perspective. It is almost offensive as a political gesture,” Raad Alkadiri, Managing Director for Energy, Climate, and Sustainability at Eurasia Group, said.
The group, which includes Russia and Iran as members, agreed to make this decision two weeks after Biden's visit to Saudi Arabia, in which the US President sought to pressure Saudi Arabian and UAE leaders to produce more barrels in order to cool down oil markets, amid the oil embargo placed on Russia.
The cartel and its allies have previously increased production by approximately 430,000-650,000 bpd in the last few months. However, they have not been able to reach their full target as many members have exhausted their output potential.
Biden's trip to Saudi Arabia
Two weeks ago, Biden traveled to Riyadh in an attempt to repair relations with MBS following the assassination of Jamal Khashoggi.
As the US economy is projected to head further into recession, the entire motivation for the trip was to divert threats to Biden's approval ratings by reducing oil prices.
During his visit to Saudi Arabia, Biden stated that he expects further oil supply increases from the Kingdom to help tame domestic fuel costs after the visit.
However, Saudi Foreign Minister Faisal bin Farhan denied much of what US President Joe Biden remarked, most notably about increasing oil production.
Earlier today, the Biden administration approved an arms sale worth $5.3 billion to Saudi Arabia and the UAE. However, it has not lifted its ban on offensive weapons sales to Riyadh.
OPEC+ limited capacities
On Wednesday, Benchmark Brent oil futures rose by $3 per barrel and traded close to $102 per barrel following the agreement.
By September, OPEC+ was meant to have taken down all of the production cuts it implemented in 2020 due to the adverse effects of the pandemic.
But by the end of June, OPEC+ had a production of almost 3 million barrels per hour below its quotas. This was due to sanctions against some members and low investments by others. Its ability to increase output was severely affected.
Although Saudi Arabia and the UAE have an estimated surplus capacity to increase production, French President Emmanuel Macron expressed that he was told by Saudi Arabia and UAE that they had limited capacity to increase oil production.
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