The US is looking to ask the Organization of the Petroleum Exporting Countries (OPEC) to increase crude oil output to reign in petrol prices and curb shortages, deeming the group’s current production boost plan insufficient.
“We are engaging with relevant OPEC+ members on the importance of competitive markets in setting prices… Competitive energy markets will ensure reliable and stable energy supplies, and OPEC+ must do more to support the recovery,” CNBC reported on Wednesday, citing US National Security Advisor Jake Sullivan.
According to the report, Washington views the OPEC and allied producers’ July decision to gradually increase oil output by 400,000 barrels a day as “simply not enough” during a “critical moment in the global recovery” from the Covid-19 pandemic.
The US national average price for a gallon of gasoline was $3.186 on Wednesday, according to American Automobile Association data, up from $3.143 a month ago and roughly $1 per gallon more than a year ago. In May, the national average surpassed $3 per gallon for the first time since 2014. Washington believes that an increase in OPEC+ production would help combat the current price surge.
According to media reports, the US officials this week discussed the potential production hike with representatives from Saudi Arabia, one of OPEC’s major producers, as well as with representatives from the United Arab Emirates and other OPEC+ members.
OPEC+ made the decision to cut oil production at the peak of the pandemic crisis in April 2020, when global lockdowns left the market overstocked, which resulted in a sharp drop in oil prices. The group then removed nearly 10 million barrels per day from the market in an effort to boost prices. This year, as global demand returns to normal while lockdown restrictions ease, the market has suddenly seen crude supply shortages, driving oil prices above $70 per barrel.
OPEC+ has already started to ease production cuts and – effectively – to pump more, but is still withholding some 6 million barrels per day, which it plans to return to the market step-by-step on a monthly basis from August 2021 till December 2022.
Meanwhile, US producers were also forced to pump less in the midst of the pandemic, and their production levels have not yet returned to normal either. According to the Energy Information Administration, US oil output stood at 11.2 million barrels per day in May this year, while its pre-pandemic high was over 13 million barrels per day.
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