OPEC Agrees to Boost Oil Output
The oil cartel vowed to add 1 million barrels a day to markets. It won’t add quite that much.
Major oil producers agreed Friday to a nominal increase in crude production of about 1 million barrels per day, a bid to put a damper on high oil prices. But in practice, major oil exporters will likely only be able to add about half that total to global markets, because many countries are already producing at capacity or face severe threats of supply disruption.
Oil markets weren’t calmed by the agreement announced Friday by the Organization of the Petroleum Exporting Countries after a contentious week of meetings. Crude prices in New York rose more than 3 percent to almost $68 a barrel and rose about 2 percent in London to more than $74 a barrel.
OPEC didn’t agree to increase production as such. Rather the group, with the addition of nonmember Russia, agreed to respect its existing program of restricting supplies. But since the group had gone well overboard and trimmed output by almost 2 million barrels a day, due in large part to a steep falloff in Venezuelan oil production, respecting the original target will translate into more oil for the global market — on paper, at least.
In practice, only Saudi Arabia and Russia have the capacity to add significant amounts of crude in the next few months. That means Friday’s agreement will end up adding about 600,000 barrels of oil a day to the global market.
The contentious meeting took place under the shadow of vituperation from U.S. President Donald Trump, who worried that high oil and gasoline prices would be politically painful ahead of midterm elections later this year. Even after the group’s decision had been announced, Trump was still tweeting hopefully about OPEC increasing production.
Despite the deal, the oil market isn’t out of the woods yet. Read more about the risk of a hard-to-fight price spike later in the year.
Keith Johnson is a senior staff writer at Foreign Policy. Twitter: @KFJ_FP