Oil-pumping cranes, also known as “Emma donkeys”, work in an oil field near Almetyevsk, Tatarstan, Russia, on Wednesday, March 11, 2020.
Andrei Rudakov | Bloomberg | Getty Images
Oil prices are at their highest since 2014, and oil-importing countries are feeling the pain. But despite diplomatic pressure, it is unlikely that OPEC and its allies will decide to open the taps during the oil cartel’s meeting on Thursday.
Analysts say this likely means that energy prices will continue to rise until the end of this year and possibly into 2022.
“For now, we continue to expect to see OPEC+ members still in favor of keeping oil markets tight, and taking advantage of higher prices to improve financial accounts,” wrote Edward Bell, senior director of market economics at Dubai-based Emirates NBD. Wednesday note.
President Joe Biden has openly blamed OPEC+’s reluctance to pump more oil for the sharp rise in energy prices in the United States and around the world.
“The idea that Russia, Saudi Arabia and other major producers won’t pump more oil so that people can get gasoline to get to and from work, for example, is not true,” Biden said Sunday at the G20 meeting in Rome. , Italy.
Japan and India also joined the United States in trying to pressure OPEC to increase its production limits and help lower energy prices.
However, the group’s policy since August to gradually increase oil production by 400,000 barrels per day every month is entirely fine by members of OPEC and its allies, including Russia. Angolan Oil Minister Diamantino Pedro Azevedo said Sunday that the program was “working well and there is no need to deviate from it.”
Kuwait also said on Monday that the organization must stick to its current plan because oil markets are “well-balanced,” and OPEC members Iraq, Nigeria and Algeria made similar statements.
For the consumer, things don’t feel well balanced. Brent crude reached more than $86 a barrel in late October, its highest level in three years, and is up more than 60% this year alone. It fell in the days leading up to the OPEC meetingAnd It is trading at $81.86 a barrel at 7:20 am in London on Thursday.
West Texas Intermediate is up more than 70% this year and hit a seven-year high, recently touching $85 a barrel, although it was trading at $80.44 a barrel on Thursday at the same time in London. US gasoline also recorded its highest level in seven years.
For OPEC+ ministers, word of the month is caution, said Hermann Wang, senior oil writer at Standard & Poor’s Platts.
“Despite all the pressure from the US, India and Japan to release more crude, we heard several ministers cite Covid-19 rates and the expected seasonal drop in oil demand once the calendar has shifted to justify a more conservative approach,” Wang told CNBC.
“The price hike may be very temporary, but until the market calms down, OPEC+ can expect to hear more complaints from its major customers.”
And frustrated oil importers can do little to force OPEC – Bell wrote that the US could use crude from its Strategic Petroleum Reserves, in an effort to bring prices down. But this is a dramatic move usually reserved for emergencies such as natural disasters or war, and the US’s call for OPEC nations to pump more oil also goes against its purported goal of global leadership in climate change policy.
As a result of all this, Bell wrote, “We continue to believe that oil prices will remain high through the end of 2021 and will likely bleed into the early parts of next year.”