The OPEC+ group is set to meet on Thursday this week to determine the output levels for production beginning in May—and as volatile oil prices stick well above $100 per barrel, the group’s decision could be their most influential one yet.
Nevertheless, the market is mostly assuming that OPEC+ will stick with its pre-planned production quota hike of 400,000 bpd. On the off-chance that OPEC+ agrees to roll back their production curtailments by more than the planned 400,000 bpd for May, the group is unlikely to meet such a new quota. In fact, it is unlikely to be able to ramp up output even to the 400,000 bpd that most think it will agree to, simply because it has yet to match the current level of quotas, let alone a higher one.
OPEC+ has shown that they are uninterested in riding to the rescue of the market that is now battling high crude oil prices, which has spilled over into high gasoline prices—a worrisome reality for the Biden Administration. Despite pleas from the G7, IEA, and specifically the UK and the United States, Saudi Arabia and the UAE—both of whom are aligned in the OPEC+ agreement with Russia—have given the oil beggers the cold shoulder.
OPEC’s apparent reluctance to pump more isn’t just about Russia. The UAE has spoken out against those who have vilified the oil industry over the last few years in pursuit of the energy transition and chastised those who would now call on that industry to pump more. A few OPEC+ members have a history of following through on their bluster, even if it translates into poor decision-making. Anyone over the age of 2 likely remembers the oil price war from April 2020 when Saudi Arabia and Russia began to flood the market with oil after the OPEC+ deal to cut production fell through as the coronavirus sapped oil demand, crashing prices in spectacular fashion.
The UAE’s Ambassador to Washington muddied the outlook for the meeting earlier this month when he said that the UAE favored production increases and would be encouraging OPEC to consider higher output levels. But shortly after, the UAE stood up for Russia’s crucial role in OPEC+ in what many saw as an omen of what’s to come: OPEC+ will continue to rely on Russia’s blessing for any group decisions.
The latest sign from the outspoken UAE came today, when UAE Energy Minister Suhail Al-Mazrouei said, “We won’t add resources if the market is balanced, and the resources are in the market.”
This echoes previous OPEC comments that have maintained that today’s higher oil prices are not an issue of supply and demand fundamentals but an issue of geopolitics.
The UAE and Saudi Arabia are also unlikely to boost production—the only ones who have the ability to do so with regards to capacity—without the support of the group because doing so would violate the OPEC+ agreement it has worked so hard to maintain. It is largely assumed that Russia would object loudly to such ay any increase in old production beyond what the group has already planned.