OPEC+ Gradually Opens Oil Taps as Russian War Stirs Markets

LONDON (AP) — OPEC and allied oil-producing countries decided Thursday to gradually increase the flows they send to the world, even as Europe’s plan to sanction Russian oil it threatens to rip millions of barrels off a global market that is already thirsty for oil.

The cautious approach of the OPEC+ alliance, which includes non-member Russia, will exacerbate a global energy crisis, with prices expected to rise further. for petroleum and gasoline, diesel and jet fuel made from it. Those higher prices will worsen global inflation, reducing people’s ability to spend money that would otherwise support the economic recovery..

In an online meeting, OPEC+ stuck to its roadmap to gradually open oil taps, agreeing to add 432,000 barrels a day in June. The plan is to make those regular increases to restore cuts made in 2020 during the worst of the pandemic recession.

Oil prices have surged, more than 40% this year, as the boost in production remains less than what the United States and other oil-consuming countries are pushing to ease high prices at the pump..

Further increases in oil prices have been held back by China’s COVID-19 lockdowns cutting demand and the US and other member countries of the International Energy Agency releasing oil from strategic reserves.

Still, analysts at Rystad Energy forecast that the global market could lose up to 2 million barrels within six months if the 27 countries of the European Union approve a proposal to sanction Russian oil.. Moscow is expected to see production fall after losing its biggest oil customer: Europe..

OPEC has made it clear to European officials that the oil cartel is not going to increase production to compensate for the loss of Russian oil. Some OPEC members can no longer meet their oil production quotas.

Russia is the world’s largest oil exporter with around 12% of the world’s supply, and it fears its oil and natural gas could be cut off. have kept energy prices high. Before the invasion of UkraineRussia sends about 3.8 million barrels of oil a day to the European Union, where refineries convert it into gasoline and diesel fuel.

If the EU carries out its plans to phase out crude imports in six months, Russia could try to sell those barrels to countries in Asia not participating in the boycott. But it may not be able to find customers for all the oil displaced from Europe, even if it tries tempting knockdown prices.

For a reason, there is a limited pipeline and rail capacity to Asia. While some of the oil could be redirected by sea, that will depend on the availability of tankers willing to deal with Russian crude, given the risk of sanctions. Banks and companies that insure tanker fleets may be reluctant to facilitate the sale of Russian oil.

“Higher prices could be just around the corner,” said Bjornar Tonhaugen, head of oil markets research at Rystad Energy. “The oil market has not fully appreciated the potential of an EU oil embargo, so higher crude prices are expected in the summer months if it is voted into law.”

US oil prices rose 1.2% higher after the meeting to $109.01 a barrel on Thursday, or 43% higher since the start of the year. International benchmark Brent crude rose 1.7% to $111.81 a barrel.

The price of crude oil accounts for about 60% of the price at the pump in the United States.. The average price of gasoline in the United States stood at $4.19 a gallon on Wednesday, $1.29 more than a year ago.

Diesel for trucks and farm equipment rose even higher a year ago, by $2.34, to $5.43 a gallon.

Drivers in Europe, where taxes make up a larger proportion of the price at the pump, are also paying more. Petrol prices are averaging 1.95 euros per liter in Germanyor the equivalent of 7.77 dollars per gallon, while diesel has been at 2.02 euros per liter, or 8.05 dollars per gallon.

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