(Bloomberg) -- OPEC+ will discuss a proposal to increase the size of its oil-supply increases by around 50%, potentially bowing to months of pressure from major consumers including the US to help ease the pain of high energy prices.
Ministers from the group will meet on Thursday to discuss adding about 600,000 barrels a day of oil to the market in July and August, up from 432,000 barrels a day in recent months, delegates said, asking not to be named because the discussions were private.
If the Organization of Petroleum Exporting Countries and it allies do open the taps wider it would be a major turnaround. The group, led by Saudi Arabia, has been doggedly sticking to its plan for gradual monthly supply increases even after the invasion of Ukraine by Russia, a key member of the group, upended global markets and sent energy prices soaring.
The cartel has so far avoided discussing the crisis at most meetings, saying it’s a matter of politics rather than markets. Every member, including Russia, would have to approve any change to the OPEC+ agreement that would allow larger oil-production increases.
“The oil market is holding its breath ahead of the OPEC meeting,” said Jens Naervig Pedersen, a senior analyst at Danske Bank A/S in Copenhagen. “The market is likely positioned for some official indication that OPEC will make up for some lost output from Russia following the EU embargo.”
Oil pared losses in New York, trading 1% lower at $114.07 a barrel as of 8:29 a.m. local time.
Any additional supply increases from OPEC+ would probably only come from a few countries. Only Saudi Arabia, the United Arab Emirates and Iraq have significant volumes of spare capacity that could be tapped as soon as July.
Many other members, from Nigeria to Angola, have been struggling to hit their output targets for months. Russia’s production has dropped significantly since the invasion of Ukraine on a combination of western sanctions, shipping difficulties and rejection by some traditional customers.
Political pressure from the White House may have brought about the Saudis’ policy shift. The kingdom’s foreign minister said last week that there was nothing more it could do to tame oil markets, and even suggested there was no shortfall of crude.
“While we initially thought such a policy shift would likely coincide with a meeting between President Biden and Crown Prince Mohammed bin Salman, we now believe that the expiration of the OPEC+ agreement could potentially come at tomorrow’s ministerial meeting,” RBC (TSX:RY) strategists including Helima Croft said in a note late on Wednesday. “The remaining barrels could be added back in July and August.”
(Updates with oil price in sixth paragraph.)
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