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OPEC + may not be very useful for oil and petrol highs

Article author:

The Associated Press

Associated Press

Cathy Bussewitz

New York (AP) — Oil prices are high and drivers are paying more for pumps. However, OPEC's oil cartels and ally producers may not be very helpful as they determine the amount of crude oil to send to the global market on Thursday.

This is because 23 OPEC + alliances, including Russia, have struggled to produce enough oil to keep up with the recovery in fuel demand since the COVID-19 pandemic. In addition, Western buyers are avoiding barrels from Russia over the war in Ukraine. In other words, less oil is on the market.

Saudi Arabia-led OPEC and its allies decide whether to increase production in August beyond the increase of 648,000 barrels per day agreed by the group at the previous meeting. To do. The push was a modest step in providing some relief for soaring prices. Previously, OPEC + added about 432,000 barrels per day to bring oil back to market after a dramatic reduction in production during a pandemic.

Gasoline prices around the world have reached painfully highs. In the United States, global oil prices have fallen recently, after surpassing $ 5 a gallon for the first time this month, as global oil prices fell for fear of a recession. Many experts say he can do little, but U.S. President Joe Biden has asked Congress to stop gas and diesel taxes, and gasoline prices for struggling Americans. You are under pressure to do whatever you can to lower your tax.

On the other hand, OPEC could, in theory, help lower prices by increasing production. But even if Biden urges the group to do so, that doesn't mean it will.

Production is well below OPEC + quotas. Angola and Nigeria, in particular, have a long-standing shortage, raising questions about how much reserve capacity Saudi Arabia and the United Arab Emirates have.

Also, even if OPEC + countries can increase production, there is little incentive to support it, said Heather Heldman, managing partner of Luminae Group.

"After all, they are worried about economic returns, not the political property of foreign leaders," Heldman said.

In addition, Biden is planning his first trip to Saudi Arabia as president, and the two countries will want to make some positive announcements after that summit next month, Heldman said. Said.

"From a Saudi perspective and an Emiratis perspective, you don't have to make meaningful gestures now," she said.

Russia's war in Ukraine has contributed to rising oil prices that fuel inflation around the world. At a group summit of seven major economies this week, the United States demanded a price cap on Russian oil imports to slow price spikes and reduce money from oil sales flowing into the Kremlin's battlefield. ..

The G-7 has agreed to consider imposing a cap by tying it to services needed to sell oil, such as insurance and shipping. Service providers will face sanctions if they promote the sale of oil above the limit. However, this proposal remains open to many important aspects and will be the subject of discussion in the coming weeks.

The European Union, Russia's major oil importer, has also approved a ban on 90% of Russia's oil imports by the end of the year.

According to the US Energy Information Administration, as of May, surplus capacity in non-OPEC countries has decreased by 80% compared to 2021. Surplus capacity is oil production that goes online within 30 days and can last for at least 90 days. In 2021, about 60% of surplus capacity was in Russia, but sanctions have abolished much of it as of May 2022, officials said.

Soaring US gasoline prices aren't just about rising oil prices and falling oil prices in the market. Most American refineries operate at capacity, so even if more oil is produced, a quick conversion to gasoline, jet fuel or diesel cannot mitigate high prices.

US crude oil fell 0.2% to $ 109.70 a barrel prior to the conference, while international benchmark Brent fell 0.6% to $ 115.35 a barrel.