OPEC and its allies are expected to stick with plans for a modest increase in oil supplies this week, shunning calls from consumers to cool the price rally.
The Organization of Petroleum Exporting Countries and its partners will probably ratify the scheduled December hike of 400,000 barrels a day when they meet on Nov. 4, continuing their gradual revival of output halted during the pandemic, according to all 21 respondents in a Bloomberg survey.
U.S. President Joe Biden has led calls from major economies for the group to open its taps more quickly, as the highest crude prices in seven years squeeze motorists and threaten the global economic recovery with an inflationary surge. Brent futures are near $85 a barrel in London, whipped up by a global energy crunch centered in natural gas markets.
But Saudi Arabia and others in the 23-nation alliance have pushed back, with producers from Kuwait to Kazakhstan issuing a rare flurry of statements in recent days extolling the need to remain cautious.
Additional oil barrels would do nothing to alleviate the energy crisis when the real shortfall is in natural gas supplies, they contend. Fuel demand remains vulnerable to ongoing outbreaks of Covid-19, and oil markets are in any case likely to return to surplus early next year, they say.
See also: Oil Market Is Jumping at Shadow of a Supply Crunch, Says WoodMac
“We’re not out of the doldrums of Covid,” Saudi Energy Minister Prince Abdulaziz bin Salman said in a Bloomberg television interview on Oct. 24. “One needs to be careful also of taking things for granted when the crisis has been somewhat contained, but is not necessarily over.”
Several delegates from OPEC+ nations have privately said they expect the group to press on with its original plan. Russia and the United Arab Emirates — who have often been keen to ramp up exports more quickly — have yet to publicly specify their positions.
If OPEC+ refuses to act more vigorously, consumers may take matters into their own hands.
After a campaign of quiet diplomacy by a number of countries, Biden said on Sunday he’s contemplating taking action, but wouldn’t detail the precise steps. RBC Capital Markets said it believes the administration is prepared to tap the nation’s emergency oil stockpiles.
Japan took up the refrain on Tuesday, with Trade and Industry Minister Koichi Hagiuda urging OPEC+ to hold discussions to stabilize the market. He added that Tokyo is liaising with the Paris-based International Energy Agency, which oversees the multinational use of emergency oil reserves.
Bloomberg’s survey is based on replies from analysts, traders, brokers and refiners in Europe, the U.S. and Asia.
OPEC+ has managed to surprise market observers several times over the past two years — increasing supplies when no change was expected and vice versa — a trait linked to Prince Abdualaziz’s fondness for wrong-footing speculators.
“Given the intensity of the White House pressure and from other key consuming countries like India, we certainly do not rule out that Saudi Arabia could indeed green-light an increase beyond” what’s expected, said Helima Croft, RBC’s head of commodity strategy. But for the time being, “OPEC still seems intent to stay the course,” she said.