International Business News – Financial Associated Press, July 4 News As domestic oil prices soared due to sanctions against Russia, European and American countries have recently put pressure on OPEC to increase production. Shortly after U.S. President Joe Biden spoke last week, British Prime Minister Boris Johnson this week urged Saudi Arabia to increase oil production in an attempt to cool record fuel prices.
Johnson told the British House of Commons on Monday that “there may be some question as to how much more Saudi Arabia can increase production at this particular moment. Nonetheless, there is no doubt that they need to produce more oil.”
Last week, Biden said he hoped major Persian Gulf producers would increase output. Biden will visit several countries in the Middle East this month, including Saudi Arabia. Market speculation is that Biden’s trip is to persuade Saudi Arabia to increase production to suppress oil prices.
Crude prices have remained above $110 a barrel for much of this year as supplies can’t keep up with post-pandemic rebounding demand, significantly increasing the cost of living for consumers and potentially tipping the global economy into recession.
The International Energy Agency (IEA) has warned that Western sanctions on Russia’s energy trade have roiled global oil markets and could lead to the worst supply disruption in decades.
“There is no question that we need OPEC+ to produce more oil,” Johnson said.
Johnson’s call comes as UK petrol prices hit record highs, sparking a wave of “slow down” protests on the country’s motorways.
Petrol prices in the country have hit a record high of 191.53 pence ($2.32) a litre, while diesel prices are just shy of the record 199.03 pence a litre, according to the Royal Automobile Club (RAC). Soaring fuel prices are driving Britain’s highest inflation rate in years.
OPEC+ fails to contain oil prices
OPEC+ has agreed to accelerate its planned output increase this summer, although investment restrictions and political instability mean most members cannot provide additional supply. Analysts are now even skeptical about how much extra capacity Saudi Arabia and the United Arab Emirates, two of OPEC+’s main oil exporters, can deploy.
Last week, French President Emmanuel Macron told the U.S. president at the G7 summit that UAE President Mohammed bin Zayed revealed that the UAE’s oil production has reached “maximum” and that Saudi Arabia can only “add a little more”.
While the UAE quickly clarified that “maximum” production refers only to its OPEC+ quota, questions remain about the ability of the two exporters to increase production.
Official Saudi figures show the kingdom’s crude output could reach 12 million barrels a day, about 1.5 million barrels higher than current levels. But Saudi Arabia’s previous highest monthly production level was only 11.6 million bpd in April 2020, according to data compiled by the media.
Some of the latest data shows that OPEC+ is also doing little to help rein in prices.
OPEC production fell by 120,000 barrels a day in June, the second straight monthly decline, the survey showed. OPEC+ producers have supplied more than 500 million barrels of oil to the global market over the past two years, according to media reports last week.