Oil-producing countries allied under the OPEC+ banner have agreed to pump more oil in July and August, accommodating months of requests by the United States and others to boost production to cool soaring crude prices that have fed into a cost-of-living crisis amid sky-high inflation.
The OPEC+ cartel said in a June 2 statement that it had agreed to ramp up crude output by 648,000 barrels per day (bpd) in July and a similar amount in August.
This is 216,000 bpd higher than their initial production schedule, which aimed to add 432,000 bpd a month to overall OPEC+ output over three months until September.
The moves come after a long-running campaign led by the United States to persuade OPEC+ to pump more oil in a bid to quell surging crude prices, which have helped push inflation to dizzying heights and sent gasoline prices soaring.
The White House hailed the decision, noting the emergence of “new market conditions” for crude, a likely reference to reduced output by Russia, an OPEC+ ally. Russian crude output has fallen by about 1 million bpd following Western sanctions on Moscow over the invasion of Ukraine.
“The United States welcomes the important decision from OPEC+ today to increase supply by more than 200,000 barrels per day in July and August based on new market conditions,”, White House Press Secretary Karine Jean-Pierre said in a statement, which included a nod to Saudi Arabia for “achieving this consensus amongst the group members.”
Saudi Arabia, which chairs OPEC+ and is its biggest oil producer, is likely to account for the bulk of the production boost.
The country earlier signaled it may be willing to pump more oil to offset Russian output shortfalls. Russian crude production in April stood at around 9.3 million bpd, below its OPEC+ target of 10.44 million bpd.
The cartel’s decision comes weeks ahead of what is to be President Joe Biden’s first visit to Saudi Arabia after two years of strained Washington-Riyadh relations due to disagreements over the war in Yemen and the Kingdom’s record on human rights.
The White House statement also credited “efforts and positive contributions of UAE, Kuwait, and Iraq” while vowing that the Biden administration would “continue to use all tools at our disposal to address energy prices pressures.”
Biden, who has faced a deluge of criticism from his political opponents over soaring gasoline prices and high inflation more generally, has sought to pin the blame on factors like “Putin’s price hike” and U.S. oil industry “price gouging.”
While Biden ordered a release of crude reserves from the national strategic stockpile, this has only had a temporary impact.
Some experts and industry figures have blamed Biden’s climate agenda for discouraging investment in new oil supply projects and so holding back initiatives that could put a real dent in prices.
Dan Eberhart, CEO of Canary, one of the biggest privately-owned oilfield services firms in the United States, wrote in a recent op-ed in Forbes that Biden “is under heavy pressure to ‘do something’ to bring down energy prices, but the options are few and the White House looks lost when it comes to oil markets.
“Meanwhile, Biden continues to advance his climate agenda, blocking pipelines, forcing companies to increase disclosure of greenhouse gas emissions, and putting new oil and gas leasing on federal lands on ice.
“This sends the wrong message to the oil industry when it comes to new investments in supply projects.”
He argued that the Biden administration should accept that the low-carbon energy transition will take a long time and that fossil fuels “will have a huge role to play in our economy for decades to come. Until we collectively accept this and promote higher, responsible investments in new supply, we are going to grapple with high prices.”