OPEC Plus to Move Ahead With Plans for Modest Increase of Oil Releases

With analysts warning of a coming oil supply crunch, OPEC and its allies, including Russia, decided on Thursday to stick with their previously agreed plan of modest monthly increases. The group, known as OPEC Plus, said it would increase oil output in May by 432,000 barrels a day, a slight uptick from the usual increase of 400,000 barrels a day for technical reasons.

In a news release after what was probably a very brief meeting, OPEC Plus repeated its thinking of a month earlier. The group said that the outlook was for “a well-balanced market” and that recent volatility in prices was “not caused by fundamentals, but by ongoing geopolitical developments,” apparently meaning the war in Ukraine.

In contrast, many analysts are warning that with oil storage tanks at low levels, sanctions over the war in Ukraine and a kind of buyers’ strike underway against Russian oil, a major supply crunch could develop, lowering global economic growth and stoking inflation.

OPEC Plus acted just before the White House made public plans to release up to 180 million barrels of oil from emergency reserves in response to the rising oil prices and in anticipation of possible spikes in demand or drops in supply. White House officials said they expected other countries to announce additional contributions at a meeting of the International Energy Agency on Friday.

After months of fruitlessly asking OPEC Plus to increase oil production to calm roiled markets, Washington seems to have decided to take charge.

“We know that consumers need relief now, and that is why the president has acted,” a senior administration official said.

Prince Abdulaziz bin Salman, Saudi Arabia’s oil minister, likes to describe the Organization of the Petroleum Exporting Countries as a kind of central banker of oil, smoothing market fluctuations by adding and subtracting supplies, although analysts dispute how effectively it has played this role. In current circumstances, though, OPEC Plus may not be able to act because Russia, while not an OPEC member, has been an integral part and a co-chair of the larger group since it was formed in 2016.

Alexander Novak, Russia’s deputy prime minister, is said to have participated in Thursday’s teleconference. A decision to pump up oil output might have been seen as aiding the West in support of Ukraine and detrimental to Moscow’s interests.

OPEC, whose de facto leader is Saudi Arabia, seems to be trying to ignore the problem caused by Russia’s presence in the group. For instance, OPEC’s latest oil market report, published in mid-March, forecast that Russia’s oil production would be 11.8 million barrels a day in 2022, an increase of nearly one million barrels a day over 2021 levels.

Not reducing those estimates because of the war and sanctions “partly reflects the political sensitivity of downgrading forecasts for Russia,” wrote analysts at Energy Aspects, a research firm.