Zurich Despite high oil prices, the alliance of oil exporting countries OPEC plus sees no reason to intervene in the market. As the energy ministers of the 23 Opec-plus countries decided at a virtual summit meeting on Thursday, the alliance wants to stick to its long-term production policy and therefore increase oil production in April by only around 400,000 barrels per day.
This means that OPEC plus is sticking to its course of not letting the artificial limitation on production volumes expire until September. This goes back to the price crash on the oil market in spring 2020. In the meantime, the price of European Brent oil has leveled off well above the $100 per barrel (around 159 liters) mark. Within twelve months, the price of oil has increased by almost 80 percent.
Despite the decision by OPEC plus to bring less than half a percent of global oil demand onto the market, the price of crude oil has meanwhile slipped by six percent on Thursday. Brent oil was priced at around $107 a barrel.
Analysts see the reason for the drop in prices in media reports that the USA is apparently considering releasing up to 180 million barrels of oil from the national emergency reserves. The measure is intended to lower fuel prices, which have risen sharply since Russia invaded Ukraine, two people familiar with the matter told Reuters.
According to the insiders, the US plans to make one million barrels of oil available per day. This corresponds to around one percent of the daily global oil demand. “That would be a unique measure,” says Commerzbank expert Carsten Fritsch. In addition, talks are being held with other industrialized countries on Friday to organize a coordinated release of reserves. “Should this gigantic release of emergency reserves actually come about, the oil market would be no longer undersupplied in the second quarter,” says Fritsch.
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Russian oil industry faces sanctions
The move is an attempt to control oil prices. US President Joe Biden apparently had the measure prepared in anticipation of the latest Opec-plus decision. “The US is opening the oil floodgates,” commented Helima Croft, an analyst at investment bank RBC Capital Markets, on the move.
So far, the alliance of oil exporters has shied away from breaking with Russia, which, along with Saudi Arabia, is one of the most powerful members of the alliance. Saudi Oil Minister Prince Abdulaziz bin Salman recently stressed that politics would be left out of the OPEC+ negotiations.
The possible release of the US oil reserve shows how much US President Joe Biden is under domestic political pressure because of the high fuel prices. It would be the third time in a few months that the US has drawn on its strategic reserve. According to oil expert Croft, this is currently being used as a tool to shield US consumers from the consequences of decisions in American foreign policy, in particular the harsh sanctions against Russia.
At the end of November 2021, Biden had 50 million barrels thrown onto the market. However, the measure was largely ineffective. At the beginning of March, the International Energy Agency (IEA) released crude oil, petrol and diesel from the reserves of its member states. The IEA is assigned to the association of industrialized countries OECD, which includes Germany as well as the USA.
The effect of such measures is debatable: Oil prices often drop briefly in response to relevant news. However, market participants often point out that releases from the strategic reserve often support oil prices in the medium term. Because such a step is a signal for an extremely tense market situation.
In addition, the stocks must be replenished after the end of the measure. Oil stocks worldwide are already at an extremely low level. In the current environment, it will probably take months, if not years, for these to be replenished.
However, it is becoming apparent that the Russian oil industry is also increasingly feeling the effects of the sanctions. According to media reports, refineries in Russia have already started to reduce the production of diesel and other fuels. The reason for this is therefore full storage facilities. In extreme cases, Russia could soon be forced to cut crude oil production as well.
More: Record prices for electricity and fuel: These are the beneficiaries of the energy price rally.