OPEC Weighs Shift in Oil Policy After Crude Release
Top oil producers Saudi Arabia and Russia are considering a move to pause their recent efforts to provide the world with more crude, according to people familiar with those discussions, after Washington and other countries said they would release a slug of stored oil in an effort to lower prices.
Riyadh and Moscow have led OPEC and a group of other oil-producing countries in coordinating output closely amid a demand shock last year caused by the pandemic. Other members of that cartel, including the United Arab Emirates, aren’t convinced a pause is necessary, according to these people.
The U.S. said Tuesday that it and a handful of other countries would tap their national strategic petroleum reserves amid high oil and gasoline prices. The move came after repeated attempts by Washington to convince the Saudi-led Organization of the Petroleum Exporting Countries and a group of Russia-led oil producers to open up their taps. The two groups, which call themselves OPEC+, are set to meet next week to review a long-term deal they reached earlier this year to boost their collective oil output.
The deal involves plans to boost output by 400,000 barrels a day each month through next year, until the group hits its pre-pandemic pumping level. The group slashed its output sharply in 2020 as demand evaporated amid Covid-19 lockdowns.
The group agreed to meet monthly to weigh up supply and demand and adjust that plan accordingly. Oil prices have hovered near multiyear highs, though OPEC and other forecasting agencies have struggled to predict demand amid the on-again-off-again nature of Covid-19 restrictions. Several countries in Europe, for instance, are moving ahead with, or considering, fresh restrictions that could sap economic activity—and by extension demand for oil.
The U.S.-led crude release of up to 70 million barrels threatens to further scramble the supply-demand balance.
To compensate for the new supply, Riyadh and Moscow are now considering a pause of the group’s monthly collective increase, OPEC delegates said. The U.A.E., a powerful OPEC member that has clashed with Saudi Arabia over OPEC policy in the past, and Kuwait are resisting a pause, according to the delegates.
Saudi Arabia sees the released crude as potentially swelling global supply and threatening to reduce prices, according to people familiar with the country’s thinking.
Markets haven’t reacted dramatically to the oil-release plan. After initially falling on news of the release, Brent crude, the international benchmark, was up 0.4% at $81.66 a barrel Wednesday. West Texas Intermediate, the main U.S. contract, was up 0.7% at $79.01 a barrel.