Analysts said that OPEC+ would hold a meeting with Russia and other allies on Thursday. It is expected OPEC to grasp world oil prices than they have in years.
OPEC+, an oil producer and its allied organization, is expected to increase 500,000 to 1 million barrels of oil per day. Still, analysts said that there are rumors that the organization may not consider increasing production. After the group reverses its 6 million barrels per day production cut by April 2022, the market may fall back into an oversupply of oil. The report boosted oil prices on Wednesday.
The international benchmark Brent crude oil futures traded at slightly higher than US$75 per barrel on Wednesday. The August West Texas Intermediate crude oil futures price was slightly below US$74 per barrel. It was close to the highest level since the fall of 2018.
Oil Prices Rose on Wednesday Due to Reports of Falling U.S. Inventories
Analysts expect OPEC to consider extending its current production agreement to the existing April 2022 end date.
The market has set a price to increase production by 500,000 barrels per day. The price will decrease slightly if the production increase gets higher than expected.
President Joe Biden has promised that the United States plans to reduce carbon emissions by half by 2030. Biden intends to put the United States on track of net zero emissions by 2050.
It Is Unclear how Or when The Biden Administration Will Let OPEC Know that The Price Is Too High
The United States currently produces 11 million barrels a day, about 2 million barrels less than the pre-pandemic high. The level of reduction also happens to be the estimated amount of the current global production deficit. The world currently uses 2 million barrels more oil than it produces every day.
Some U.S. oil producers have been slow to increase production. In addition to the new green focus, they are also hampered by a lack of capital and shareholders’ emphasis on dividends and debt repayment.
OPEC+ is a balancing actor.
If there is too little oil on the market and the price rises, American producers will be attracted to more drilling.
If it invests too much in the market to keep prices down, the U.S. may reach a new nuclear agreement with Iran.
It could result in 1.5 million barrels of oil being relaunched on the market by the end of 2021. Depended on how much oil Iran extracts from storage, this number might increase.