The OPEC+ alliance of oil producers are scheduled to gather next week as the global economy recovers from Covid-10 pandemic.
Saudi Arabia, the group leader had for the past 18 months slashed crude oil production during the pandemic.
The Saudis are set to pump at almost pre-Covid levels of 9.8 million barrels a day this month as a recovering global economy clamours for energy supplies.
By bringing those shipments back slowly enough to avert a new surplus, Saudi Energy Minister Prince Abdulaziz bin Salman has revived crude prices to $80 a barrel.
That’s swelled the kingdom’s petroleum revenues to a three-year high, putting them on track for an even bigger payout in 2022.
“OPEC+ has had a very good year,” said Ben Luckock, co-head of oil trading at commodities merchant Trafigura Group. “They have delivered: they have managed to thread the needle.”
That’s a far cry from the tumult of last March, when the plunge in fuel demand briefly pitched Organization of Petroleum Exporting Countries and its partners into a vicious fight over customers.
Those bitter memories seem very distant as the 23-nation network — jointly led by the Saudis and Russia — prepares to meet on Monday.
If there’s a threat to the delicate balance OPEC+ has achieved, it’s that the market could overheat and prices rise too high.
The alliance has signaled it will stick with its schedule of modest production increases by approving another 400,000 barrel-a-day increment for November. But the market has shifted since that road map was agreed in July.
The shortage of natural gas, which has sent prices to the equivalent of $190 a barrel, is spurring a switch to oil products for heating and manufacturing, boosting overall demand.
U.S. oil production is still recovering from Hurricane Ida, which has knocked out a total of almost 35 million barrels after slamming the Gulf of Mexico a month ago — equivalent to almost two full months of OPEC+ supply increases.
Some OPEC+ delegates say privately that the increase approved at Monday’s meeting could be bigger than the scheduled 400,000 barrels a day. Scenarios for larger hikes have been considered, said one official.
The Saudis themselves don’t want to see prices spiral toward $100 a barrel, as excessive fuel costs would curtail demand and stimulate a revival in U.S. shale output, according to people familiar with the kingdom’s thinking.
