Opec+ choice to drip-feed crude supply sends price to 7-year high

Bloomberg

Opec+ agreed to maintain its schedule of gradual monthly production increases, triggering a surge in crude prices. Ministers ratified the 400,000 barrel-a-day supply hike scheduled for November after a short video conference on Monday. Going into the talks, there had been speculation that they could opt for a larger supply increase, but no such proposal was made, delegates said, asking not to be named because the meeting was private.
West Texas Intermediate crude jumped as much as 3.3% to $78.38 a barrel in New York, the highest in almost seven years.
The agreement comes as Opec+ appears to be very much in control of the oil market. Crude is trading at multiyear highs without prompting a surge in rival supplies. The cartel’s production policy will be the main factor influencing prices in the coming months, according to Vitol Group.
This means Saudi Arabia is “keen to tweak the current Opec+ deal of monthly increases as little as possible,” said Amrita Sen, chief oil analyst and co-founder of consultant Energy Aspects.
However, there’s growing anxiety among key energy-consuming nations as prices also rise for commodities such as natural gas, food and metals. There’s a palpable concern that a surge in inflation could derail many countries’ economic policies.
The Organization of Petroleum Exporting Countries and its allies have regained a remarkably stable footing after more than a year of tumult. Monday’s agreement “will allow us to continue normalise the market situation,” Russian Deputy PM Alexander Novak said in a speech at the meeting, part of which was broadcast by Rossiya 24 state TV channel. Opec+ ministers will meet again on November 4, according to a statement from the group. If there is a threat to the delicate balance Opec+ has achieved, it’s the possibility of spillover from external crises.
“Saudi Arabia is keen to cap the upside and downside of the oil market, if needed,” said Sen of
Energy Aspects.