Oil prices rise as OPEC prepares to set new production targets | OPEC

Oil prices rose ahead of Thursday’s meeting of the OPEC cartel of oil-producing nations, as ministers prepare to set production targets for July at their first meeting since the EU imposed restrictions. sanctions on Russian crude.

OPEC is under pressure from some members to exclude Russia, the world’s third-largest oil producer, from future quotas, which could pave the way for Saudi Arabia and the United Arab Emirates to pump in more oil.

The price of Brent crude oil futures, the North Sea’s benchmark, rose 2% at one point on Wednesday to hit $117 a barrel. Its North American counterpart, West Texas Intermediate, rose by a similar amount to just under $116 a barrel. Prices had fallen from highs of over $125 earlier in the week but rebounded again as investors weighed how much production could be increased to counter the effect of the sanctions.

Ministers representing the 13 members of OPEC and the 10 non-OPEC producers led by Russia, a grouping called OPEC+, are due to meet Thursday via video conference. They are expected to approve a 432,000 barrel per day increase in July, the latest in a series of monthly increases announced in September 2021.

Russia now lags behind the group, with production expected to drop 8% this year. The the wall street journal reported on Tuesday evening that the drop in Russian production had prompted some countries, including members from the Gulf states, to suggest excluding Russia from production targets, allowing other members to increase production.

Demand for oil and energy prices has risen over the past year as major economies reopen from pandemic shutdowns, compounded by fallout from Russia’s invasion of Ukraine. Rapid price swings have contributed to inflationary pressures and cost-of-living crises around the world, as households struggle with rising fuel prices.

The price increases have prompted failed attempts by US President Joe Biden and UK Prime Minister Boris Johnson to persuade other major oil producers such as Saudi Arabia to pump more, angering environmental activists who argue the Governments should instead focus on energy efficiency measures that could quickly reduce demand. At a meeting in Germany last week, G7 energy ministers called on OPEC to produce more.

Bjarne Schieldrop, chief commodities analyst at SEB, an investment bank, said the breakup of the OPEC+ group would allow Saudi Arabia and the United Arab Emirates to use their spare capacity to increase production. However, he expressed doubts as to whether this would ease the pressure on global markets.

“EU and US minds are focused on hurting Russian oil revenues,” he said. “More oil from Saudi Arabia and the United Arab Emirates will allow the West to implement stricter bans, forcing Russian oil exports to fall without causing the price of oil to explode. So net-net , there would be no additional supply for the market.

However, Russian Foreign Minister Sergei Lavrov hinted on Wednesday that Russia hoped to continue working with OPEC.

Speaking in Saudi Arabia during a visit to the Middle East, Lavrov told a press conference: “The principles of cooperation on this basis retain their importance and relevance.”

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The US, EU and allies such as the UK have imposed sanctions on most major Russian banks involved in the oil trade, and the EU belatedly agreed on Tuesday to a partial embargo on oil imports.

The UK and EU have also worked together to ban insurers from covering ships carrying Russian oil, another move aimed at making it harder to export from Russia. Lloyd’s of London, the world’s oldest insurance market, said on Wednesday it was working closely with British and other governments and regulators to implement global sanctions against Russia.

“Lloyd’s supports and remains focused on establishing a global sanctions regime against the Russian state,” Lloyd’s said.

The EU embargo will not include oil transported by the Soviet-era Druzhba pipeline for Hungary, the Czech Republic and Slovakia, and Bloomberg Economics has calculated that Russia will still receive $285 billion ( £226 billion) this year for its fossil fuel exports, including gas on which European countries rely heavily.

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