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Gasoline prices: OPEC+ oil boost likely not much help to high gasoline prices

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Gasoline prices: OPEC+ oil boost likely not much help to high gasoline prices


NEW YORK: The decision on Thursday by the OPEC oil cartel and allied producers to boost crude output may do little to ease high oil prices and the energy inflation plaguing the global economy. The world’s thirst for oil rose by 648,000 barrels a day in August as oil rebounded from the COVID-19 pandemic and clashed with the 23-member OPEC+ alliance’s inability to meet its production quotas.

OPEC+, which includes Russia, confirmed the decision of the last meeting. Before that, it added about 432,000 barrels of oil a month to put oil back on the market after cutting production sharply during the peak of the pandemic.

The increase was largely seen as a gesture by OPEC leader Saudi Arabia to U.S. President Joe Biden, who was soon planning his first kingdom trip as president.

Biden, facing political pressure at home, has been urging producers to turn on the taps to help lower gasoline prices for U.S. drivers.

Gasoline prices around the world have reached painfully high levels.

In the United States, oil prices topped $5 a gallon for the first time this month, before falling in recent days as global oil prices fell on fears of a recession.

Biden has been under pressure to do everything in his power to lower oil prices, including urging Congress to suspend taxes on gasoline and diesel and release oil from strategic reserves, even though many experts say he can’t do anything about it.

On the other hand, OPEC could theoretically help lower prices by increasing production. But many oil-producing countries are struggling to produce what the group has decided.

Nigeria and Angola have chronic shortages, while Russia has been losing some production as Western customers shy away from its oil, either for fear of sanctions or because they don’t want to be associated with Russia’s war in Ukraine.

OPEC+ production fell by 2.8 million bpd in May from agreed levels, according to data collected by the International Energy Agency. The production agreement allows laggards to make up their quotas by the end of the year.

“However, very few will be able to achieve this, either because of limited capacity (especially in Angola and Nigeria) or because of sanctions (Russia),” Commerzbank commodities analyst Carsten Fritsch wrote in a research note. ).” “So the question is whether countries with spare capacity, such as Saudi Arabia or the United Arab Emirates, will be allowed to step in.”

However, the market is skeptical about how much spare capacity Saudi Arabia or the UAE has. And for both companies, increasing their market share at the expense of other cartel members could be a tough sell.

Oil production levels are likely to be a talking point when Biden visits Saudi Arabia next month.

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