OPEC and allied oil-producing countries rebuffed pressure from U.S. President Joe Biden to pump significantly more oil and lower gasoline prices for U.S. drivers, deciding Thursday to stick with their plan for cautious monthly increases even as prices surge and the global economy is thirsty for fuel.
The OPEC+ alliance, made up of OPEC members led by the Saudis and non-members led by Russia, approved an increase in production of 400,000 barrels per day for the month of December.
That is in line with the group’s road map to add that amount of oil to the market every month into next year. The plan is to open the petroleum taps bit by bit until deep production cuts made during the coronavirus pandemic are restored — even as prices have surged to seven-year highs.
That hasn’t gone down well with Biden, who has made repeated calls to pump more oil. The U.S. used the Group of 20 summit last weekend in Rome to consult with other oil-consuming countries on how to exert influence over the producing countries and what they might do if the Saudis and Russians continue to hold back.
The caution from OPEC+ means higher prices worldwide and more revenue for producing countries. Slower increases also mean less risk of increasing production too fast and sending prices suddenly lower as the group braces for the possibility of more economic turbulence from COVID-19 outbreaks this winter or from supply chain backups, labor shortages and rising consumer prices that have threatened the global recovery.
Extremely high natural gas prices — part of a global fossil fuel crunch — have helped push up oil prices as power generators in Asia switch from gas to oil.
Oil prices fell ahead of the OPEC+ meeting on speculation that the U.S., possibly in coordination with other countries, could try to quell the recent price rally by releasing crude from strategic reserves, according to Louise Dixon, senior oil markets analyst at Rystad Energy.
“Oil prices have taken a bearish pivot as the market appreciates a brewing standoff between oil-consumers and OPEC+,” she wrote in a market comment.
The resurgence of COVID-19 cases in China and an expected increase in U.S. crude storage also have eased prices, she said.
U.S. oil prices have dropped this week after hitting their highest level since 2014. Oil traded at $81.04 per barrel on the New York Mercantile Exchange on Thursday, off its recent peak of over $85 from last week.
International benchmark Brent crude traded at $82.64, down from over $86 last week.
At a news conference Tuesday, Biden blamed higher oil prices on refusal by Russia and the OPEC nations to increase production. He declined to say what steps his administration would take other than releasing statements that request more output, but the president hinted that additional actions were coming.
“We’ll see what happens on that score, sooner than later,” Biden said.
Biden is seeking more oil to lower gas prices for U.S. drivers while also pledging at the U.N. climate summit in Scotland this week to reduce emissions from such fossil fuels to curb climate change.
The steady rise in U.S. gas prices has eased in recent days as the typical post-summer drop in demand was delayed this year, according to motor club federation AAA.
“And if the recent steady increase in crude oil prices takes a breather too, consumers may benefit at the pump with smaller price hikes,” spokesman Andrew Gross said in a statement.
The average U.S. price of gas rose to $3.40 a gallon, but the 2-cent rise over the past week is the smallest weekly increase in a month. AAA predicted that elevated crude prices will likely keep pushing up gas prices as long as oil prices are above $80 per barrel.