After more than 2 years of coordinated production cuts, OPEC+ has reached the point when it no longer must increase production targets and needs to rethink the future of the 18-member oil group, OilPrice said.
Most analysts expect no or just very moderate changes to the OPEC+ September 2022 production guidance – with June figures already reaching a hefty 320% compliance rate, incremental supply remains the main challenge for members. Haitham al-Ghais, OPEC’s new secretary general, stated Russia’s participation in OPEC+ is vital for the success of the agreement, adding that the group does not control oil prices but fine tunes the market in terms of supply and demand.
The worsening demand outlook will play a part in OPEC+ decision making as the group wants to keep oil prices high enough to generate bumper profits without stymieing adequate supply to the market. Saudi Arabia is seeking to keep OPEC+ as the oil market’s coordination force, preferring to avoid sudden market shocks as Riyadh has finally grown to enjoy a protracted windfall period.
One oil major after another is announcing phenomenal quarterly earnings and revved-up share buyback programs, with the likes of BP, Marathon, and Devon Energy joining the list this week. Meanwhile, Brent prices have been bogged down at around the $100 per barrel mark so far this week. Should OPEC+ meeting devolve into another campaign of smoke and mirrors, the structural weakness in demand coming from weak global manufacturing data and Europe’s ongoing struggle to contain Russia’s energy blackmail might reappear again, pushing oil further down into double-digit territory.
Taxing of US crude imports raises questions. President Biden’s $433 billion tax and climate bill, potentially seeing a Senate vote this week already, aims to slap a 16.4 cents-per-barrel tax on imported crude and products, raising fears that this would inadvertently boost inflation as USGC refiners rely on heavy crudes from Latin America and elsewhere.
US targets Iranian oil trade again. The US Treasury and State Department imposed sanctions on a further six companies, based in Hong Kong, Singapore, and the UAE, for allegedly facilitating trade in Iranian oil and petrochemical products, the third round of blacklisting in the last two months. Iran signals readiness for new round of talks. With the European Union still proposing new initiatives to breach the gap between the US and Iran, with Brussels submitting a new draft text on the JCPOA revival, Tehran said it is ready to set new talks provided they lead to a “sensible and stable” deal.