At its monthly meeting yesterday, OPEC+ accelerated its monthly quota increases by 50% in the summer months, a gesture of reconciliation to the US while keeping Russia at the heart of the cartel.
The White House quickly welcomed the deal, which came after months of diplomatic pressure on Saudi Arabia to mitigate the surge in energy prices. The US hailed OPEC+ for accelerating oil production increases and singled out Saudi Arabia, as President Joe Biden’s administration seeks to cool surging fuel prices. Washington “welcomes the important decision from OPEC+ today,” said White House Press Secretary Karine Jean-Pierre. “We recognize the role of Saudi Arabia as the chair of OPEC+ and its largest producer in achieving this consensus amongst the group members.”
Ultimately, Biden was hoping that this move would send oil prices sharply lower. It did not.
“… And do not harm the oil and wine” Rev. 6:6
What happened? As Bank of America’s Christopher Kuplent writes this morning (in a note available to professional subs), contrary to earlier press reports, OPEC’s “increase” does not mean an overall increase of OPEC+ output targets previously designed to reach pre-covid levels by the end of September 2022. Instead, the decision merely brings forward September’s planned increase of 432kb/d – to be spread across both July and August (thus growing by 648kb/d each).
And while this acceleration by OPEC+ may be designed to alleviate inflation into this summer’s driving season, or at least make Biden happy, BofA sees limited upside in refining utilization – implying oil product supply constraints persist.
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