Fist Bump Fail: OPEC+ Agrees to Tiny Increase in Oil Production, Rejecting Biden’s Call for More

fist bump
Saudi Press Agency via AP

The Biden administration’s calls for a significant increase in oil production were rejected by OPEC and its allies on Wednesday. The cartel agreed to a tiny increase in output that is not expected to have more than a minimal impact on crude prices.

The Organization of Petroleum Exporting Countries and allied oil-producing countries such as Russia agreed to raise their collective output by 100,000 barrels a day in September. According to Reuters, that is equivalent to 86 seconds of global demand.

The small increase is being described as “an insult to U.S. President Joe Biden,” according to Reuters. Biden traveled to Saudi Arabia last month to persuade the kingdom’s leaders to pump more oil, a dramatic and awkward reversal after Biden promised on the campaign trails that he would “end fossil fuels” and treat the Saudis as pariahs following the killing of Jamal Khashoggi.

During a Democrat primary debate in November 2019, Biden boasted he was “going to, in fact, make them pay the price, and make them in fact the pariah that they are.” He added there was “very little social redeeming value in the present government in Saudi Arabia.”

Following Biden’s trip, the U.S. government approved the sales of missile defence systems to Riyadh.

OPEC+, as the broader group is known, dramatically cut production following the collapse of demand for petroleum in 2020. As demand recovered, the group agreed to production increases divvied up among its members in accordance with how much they cut production in 2020. Until last month, the group was implementing monthly increases of 432,000 barrels per day. Many members, however, have struggled to produce as much oil as they are permitted to under the agreement, leaving the global markets with an oil shortage.

In June, the group agreed to boost output by 648,000 barrels a day in July and August. The extra 100,000 will take effect in September.

The alliance noted that spare capacity is “severely limited.” In April, Breitbart News reported that a study by economists at the Federal Reserve Bank of Dallas had concluded that OPEC could not fill the gap between its official quota and actual production because capacity was more limited than widely understood.

Oil prices moved higher following the announcement, highlighting the insignificance of the increased production quota.

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