Ahead of OPEC's highly anticipated meeting this week, Kuwait's oil minister is already stirring the pot and throwing doubt into whether the cartel will follow through on their promised 400,000 barrels a day production increase starting in September.
Kuwait’s oil minister Mohammad Abdulatif al-Fares raised eyebrows when he said, "The markets are slowing. Since COVID-19 has begun its fourth wave in some areas, we must be careful and reconsider this increase. There may be a halt to the 400,000 (bpd) increase." Other OPEC members tried to downplay those comments but if Kuwait is worried about a potential demand slowdown, then you can be sure other members probably share the same fears.
Those fears were escalated even more after the European Union recommended that its 27 member nations reinstate restrictions on tourists from the U.S. because of rising coronavirus infections on Monday. The EU removed the U.S. from its safe list of countries for nonessential travel. While the guidance is nonbinding, it could raise concerns about jet fuel and crude oil demand.
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While many OPEC members may want to put off that increase, it might be tough from a political standpoint. OPEC Plus Russia, OPEC’s favorite co-conspirator, has been getting a lot of pressure from the Biden administration — which who looked to offset the blame from their policy decisions that caused rising oil prices and blamed the OPEC instead.
The Biden administration complained that, when OPEC agreed to raise production at the last meeting in drips and drabs, it wasn't enough production to satisfy the market. At the same time, it is kind of hypocritical of the administration to ask OPEC to produce more oil when they're putting more pressure on U.S. producers to produce less.
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A drilling moratorium, pipeline reviews and more energy industry regulations all have caused a reduction in U.S. energy output. That puts U.S. energy's fate in the hands of the OPEC Plus cartel and right now the cartel believes that they can get away with raising production because demand is growing — but there are concerns.
Some members of the OPEC Plus group may consider taking a pause until they can get a better handle on how a renewed COVID outbreak might impact demand. In the meantime, you and I, and all consumers of oil, are really being manipulated by the OPEC Plus cartel.
Politicians in the United States are masters of manipulation as well, and should allow our energy producers to do what they do best and that is produce energy in the cleanest most efficient way in the world. We should compete with OPEC as opposed to being beholden to OPEC.
Phil Flynn is senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. He is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets. His precise and timely forecasts have come to be in great demand by industry and media worldwide and his impressive career goes back almost three decades, gaining attention with his market calls and energetic personality as writer of The Energy Report. You can contact Phil by phone at (888) 264-5665 or by email at [email protected].