A flag bearing the OPEC logo in Vienna, Austria, in June 2016. Photo: Akos Stiller/Bloomberg via Getty Images
OPEC and its allied producers agreed Wednesday to increase oil output next month by around 100,000 barrels per day, a modest boost amid high oil prices and inflation and growing fears of a global recession.
Why it matters: High oil and gas caused by unstable energy supply set off by the coronavirus pandemic and aggravated by Russia's invasion of Ukraine have contributed to increased global inflation, though gas prices in the U.S. have recently started to fall since breaching $5-per-gallon in June.
- Some analysts said the modest production increase could be viewed as a slight aimed at Biden and the U.S.
- OPEC and its allied producers will be generating about 44 million barrels of oil per day next month.
The big picture: The minor increase comes after President Biden traveled to Saudi Arabia last month and discussed energy security with Arab leaders at a summit, though he said specifically that lobbying Saudi leaders for more oil was not the reason for his visit.
- Fast-falling gasoline prices, while still elevated, somewhat lessen the immediate political urgency for the White House of a major supply injection.
- The White House told a group of think tank experts last week that it believes Saudi Arabia and the United Arab Emirates are capable of increasing oil production, Axios' Barak Ravid reports.
What they're saying: "The political capital President Joe Biden spent on his mid-July oil pilgrimage to Jeddah did not bring an immediate output hike, but his advisors telegraphed expectations for an increase 'in the coming weeks,'" research firm ClearView Energy Partners said in a note.
- "Today's decision appears to have fallen well short of hopes, especially after the White House and State Department doubled down yesterday by praising Riyadh for another Yemen truce extension and announcing a ~$3.05 B weapons sale," it added.
Robert Yawger, an analyst with Mizuho Securities USA, said in a note that "market fundamentals are slipping, and the end of summer driving season will necessitate less crude oil through the refinery. However, the 100,000 is a slap to the face for President Biden."
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