OPEC and its allies (OPEC+) said Thursday it would increase production capacity. Americans shouldn’t expect gas prices to change much, though.
OPEC+, which is an alliance of the Organization of the Petroleum Exporting Countries and other producing nations, including Russia, agreed to up crude output by 648,000 barrels per day (bpd) in both July and August.
The added supply represents less than 1% of global demand, and it will do little to cover the loss of Russian oil on global markets.
Russia produced about 9.3 million bpd in April, falling short of its OPEC+ target of 10.44 million bpd. Western sanctions could reduce Russia’s production by another 2 to 3 million bpd according to a range of industry estimates.
A Western diplomat said Russia might be ready to agree to other members of OPEC+ to fill a gap in its output to preserve unity in the group and maintain support from the Gulf, which has tended to take a neutral stance over the Ukraine war.
Thursday’s announcement by OPEC+ is seen as a largely symbolic but good-will gesture towards the West and was welcomed by the White House. A potential summit between President Biden and Gulf Arab leaders is in the works for later this month.
Even if the result of that summit is increased crude oil output by OPEC+, don’t expect gas prices to drop dramatically. Most OPEC countries are already producing at capacity, and it’s estimated OPEC has less than 2 million bpd of spare capacity in total.
Reuters contributed to this report.
