Investors are awaiting a meeting of members of the Organization of Petroleum Exporting Countries (OPEC) and its allies among the major producers in the framework of the “OPEC +” alliance, on Wednesday, to decide on a September production level.
This monthly meeting takes place after the important visit by US President Joe Biden to Saudi Arabia on July 15 and his participation in the Gulf Summit with three other countries, Iraq, Jordan, and Egypt.
The issue of increasing oil supplies was the most important discussed between Biden and Saudi Crown Prince Mohammed bin Salman. Biden said after the visit that “officials in Saudi Arabia share the urgent need to increase oil supplies as “additional steps are expected” in the coming weeks to achieve that.
But Saudi was clear about its commitment to work within the “OPEC +” alliance and sent him a direct message that any decision to increase production cannot be taken unilaterally but within the framework of the alliance that includes Russia, which the US is trying to impose sanctions on to prevent it from benefiting from its oil revenues for use in its war on Ukraine. This is what Foreign Minister Prince Faisal bin Farhan said frankly to reporters: “We listen to our partners and friends from all over the world, especially consuming countries, but in the end, OPEC + follows market conditions and will provide energy as needed,” as reported by Bloomberg.
Russia
A few days before the OPEC + meeting, Russian Deputy Prime Minister Alexander Novak visited Riyadh and met Saudi Energy Minister Prince Abdulaziz bin Salman Al Saud. Following the meeting, he confirmed that Russia and Saudi Arabia are firmly committed to the goal of the “OPEC +” agreement to maintain market stability and restore the balance of supply and demand. He added that it was agreed between the two sides to continue their efforts within the framework of the “OPEC +” organization to restore stability to the global oil market.
Novak, through his statements, which were reported by the Russian news agency (TASS), wanted to remind the US of the importance of its role in the alliance and in the stability of the oil market.
The US is seeking the agreement of major oil importers to apply a ceiling on the price of Russian oil. But this would require the approval of both China and India to have a real impact, but both have ramped up purchases of heavily discounted Russian oil in recent months.
Russia’s reaction to the application of a cap on the price of its oil may prompt a response to stop oil exports. This is what Novak declared frankly a few days ago, saying that his country would not supply the world markets with oil if the price ceiling was set at a level lower than the cost of Russian production.
Washington and Western countries are concerned about the rise in global crude oil prices during the coming period, coinciding with the entry into force of the European Union’s ban on insurance and financing services for maritime transport of Russian oil in December 2022, when Russia will be removed from the insurance market for global oil shipments, given that most ports do not allow tankers to berth unless they have full insurance coverage.
This would severely impede the flow of Russian oil globally, leading to a record rise in oil prices, which the Biden administration cannot afford at the moment, according to “Oil Price.com”.
Haitham Al-Ghais
The new Secretary-General of “OPEC” Haitham Al-Ghais highlighted the importance of Russia, which produces about 10 million barrels, representing 10 percent of the world’s production per day, in the “OPEC +” alliance. He said in an interview on Sunday that its presence is essential to the success of the agreement on a September production, describing it as “a big, major and highly influential player in the global energy map.”
Al-Ghais, who chairs the organization’s meeting for the first time after the death of Muhammad Barkindo last month, spoke about the recent increases in oil prices, saying: “For me, I still stress that the recent rise in oil prices is not only related to the events between Russia and Ukraine. But all the data confirm that prices began to rise gradually and cumulatively, and before the outbreak of the Russian-Ukrainian events, due to the prevailing perception in the markets that there is a shortage of production capacity reserve, which has become confined to a few and limited countries.
All these rapid developments give the impression that Wednesday’s meeting will keep production steady amid the decline in prices, or decide on a very slight increase for the month of September. And even if “OPEC +” seriously considers increasing production again, there is no guarantee that, as we have said – this increase will be distributed to all Member States. This makes the implementation of the increase decision practically difficult because a number of member states are unable to meet the ceiling required of them to produce it, due to the lack of investments in this sector. According to Al Ghais, the world needs oil investments estimated at $12 trillion over the next 25 years.
