OPEC+ Sticks to Existing Production Increase Plan Despite Biden's Pressure... International Oil Prices Fall (Comprehensive)

Monthly 400,000 Barrel Increase Continues... "Impact of COVID-19 Still Ongoing"
Growing Expectations for US Strategic Petroleum Reserve Release... "All Means and Methods Mobilized"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Hyunwoo Lee] The OPEC Plus (OPEC+), a coalition of major oil-producing countries, announced that it will maintain its existing policy of increasing production by 400,000 barrels per month despite pressure from the United States to boost oil output further. In response, the U.S. government has indicated a strong possibility of releasing Strategic Petroleum Reserves (SPR) through various policy measures, intensifying volatility in international oil prices. Experts predict that the combination of production limits by oil-producing countries and policy responses from the U.S. government could cause international oil prices to remain unstable for some time.

On the 4th (local time), OPEC+ member countries held a production meeting and announced that they would maintain the existing policy of increasing daily production by 400,000 barrels next month as well. Alexander Novak, Russia's Energy Minister attending as Russia's representative, explained at a press conference after the meeting, "Seasonal demand declines are expected in the fourth quarter of this year and the first quarter of next year, and global crude oil demand is still under pressure due to the COVID-19 Delta variant and related regulatory measures in some countries," clarifying the reason for sticking to the existing production increase policy.

Despite additional pressure from the United States to increase production, OPEC+ member countries declared their intention to adhere to the gradual production increase policy. Previously, President Joe Biden publicly urged oil-producing countries to increase production during the 26th UN Climate Change Conference of the Parties (COP26) summit held in Glasgow, UK, stating, "It is not right for oil-producing countries such as Saudi Arabia and Russia to withhold production to drive up prices." According to CNBC, the U.S. government has been pressuring OPEC+ countries to more than double their current production increase.

Nevertheless, international oil prices actually declined. On that day, West Texas Intermediate (WTI) crude oil prices on the New York Mercantile Exchange (NYMEX) closed at $78.81 per barrel, down 2.53% from the previous session. WTI prices fell below the $80 mark for the first time since October 11. Brent crude oil from the North Sea also closed at $80.54 per barrel on the UK ICE Futures Exchange, down 1.77% from the previous day.

The expectation of a possible SPR release by the U.S. government is credited with pulling down international oil prices. On the same day, the White House declared that it would deploy various countermeasures to stabilize oil prices immediately after the OPEC+ meeting results were announced, increasing expectations for an SPR release policy.

White House spokesperson Karine Jean-Pierre emphasized during a press briefing held right after the OPEC+ meeting results announcement, "The U.S. government will ensure that this critical moment of global recovery is never compromised," and added, "We will use all means and methods to address this issue."

Market experts forecast that in the short term, the interplay between the interests of oil-producing countries and U.S. policy responses will cause oil prices to exhibit highly unstable trends. According to Bloomberg News, U.S. investment bank Goldman Sachs stated in a report on the same day, "With the resumption of negotiations to restore the Iran nuclear deal (JCPOA - Joint Comprehensive Plan of Action) expected to restart on the 29th of this month, coinciding with the return of Iranian crude oil supply to the market, oil price volatility will be very high until the end of the year." They further explained, "If demand sharply declines again due to the spread of COVID-19 variants, oil companies' drilling activities could rapidly decrease, raising concerns about production cuts and potentially causing oil prices to surge again."

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