Opec + set to meet amid calls for lower prices as oil hits multi-year highs

Opec + is due to meet on Thursday amid calls for the producer alliance to help bring down oil prices which have reached multi-year highs.

The meeting comes at a time when global supply is tight as demand increases as developed economies rebound faster than expected from the coronavirus-induced slowdown.

The Saudi-Russian-led OPEC + may consider increasing the offer when it meets for a ministerial session.

The producer alliance will review an earlier plan to bring 2 million barrels a day back to market by the end of the year.

So far, the energy bloc has increased supply in 400,000 bpd increments, but could consider a higher volume increase after facing pressure from the United States and crucial oil consumers to flatten price.

Oil prices have risen this year as economies improve after Covid-19 closures, with borders reopening and mobility restrictions easing.

Air and land transport resumed, increasing demand for crude oil and related products.

However, the supply chains disrupted by the pandemic have not been fully restored and the energy industry continues to struggle with underinvestment.

These factors have pushed the price of Brent to three-year highs in recent weeks, with West Texas Intermediate, the main US benchmark, hitting seven-year highs.

Brent is up about 62% this year while WTI is up about 71%. Natural gas, which is tied to the price of crude, has also rebounded this year and is up 78 percent so far.

Brent fell 1.59% to trade at $ 83.37 a barrel at 12:05 a.m. UAE time on Wednesday. WTI fell 1.74% to trade at $ 82.45 a barrel.

Opec + is under pressure from Washington, with US Energy Secretary Jennifer Granholm blaming the alliance for the recent surge in oil prices.

US President Joe Biden also called on the group to do more to contain the rise in commodity prices.

The group has not publicly responded to comments from Mr Biden and Ms Granholm.

Kuwait and Iraq have both rejected requests from the United States to increase supply while Saudi Arabia continues to maintain that the market is well supplied.

“I don’t think Opec + will give in to the pressure and increase production quotas more than the previously agreed 400,000 barrels,” said Jeffrey Halley, senior market analyst for the Asia-Pacific region in Oanda.

“They have already surprised the markets. If they increase production, the instinctive selling could cause oil to drop by as much as 10 percent.”

US pressure on OPEC + is also working against its efforts to assert itself in a leadership position at the ongoing Cop26 summit in Glasgow.

“The view of calling on oil-exporting economies to increase production also flies in the face of US efforts to regain leadership in global climate change policy,” the senior director of climate change said on Wednesday. market economy at Emirates NBD in a note.

“The solution to energy market shortages – not caused by oil markets initially – will be tackled in the short term by building precisely on the kind of fuels that international leaders and climate activists are pushing against – namely coal, natural gas and petroleum. “

At the meeting, Opec + is also expected to factor in the possibility of a much colder winter in the Northern Hemisphere, which could lead the rally and push Brent above $ 100.

Political organizations such as the International Energy Agency estimate that demand will increase by 500,000 bpd due to the current scarcity in world markets.

The group is also closely monitoring the possible return of Iranian barrels as talks with Tehran and the international community over the nuclear deal are expected to resume this month.

On Tuesday, Bank of America said high oil prices are expected to continue through 2023, with the average price of Brent expected to continue to trade above $ 80 a barrel.

The lender expects Brent to average $ 85 per barrel in 2022 and $ 82 per barrel in 2023. WTI is expected to trade at $ 75 and $ 70 per barrel in 2022 and 2023, has declared BofA.

Emirates NBD has said it expects Opec + members to remain supportive of keeping oil markets tight.

“We remain of the view that oil prices will remain high until the end of 2021 and likely bleed early next year.”

Update: November 3, 2021, 9:40 a.m.

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