The OPEC + alliance of oil producers is expected to meet next week as the global economy recovers from the Covid-10 pandemic.
Saudi Arabia, the leader of the group, had, over the past 18 months, reduced its production of crude oil during the pandemic.
The Saudis are expected to pump to near pre-Covid levels of 9.8 million barrels per day this month as the recovering global economy calls for energy supplies.
By reducing those shipments slowly enough to avoid a further surplus, Saudi Energy Minister Prince Abdulaziz bin Salman has boosted crude prices to $ 80 a barrel.
This took the kingdom’s oil revenues to a three-year high, putting them on track for an even bigger payout in 2022.
“OPEC + has had a very good year,” said Ben Luckock, co-head of oil trading at commodity trader Trafigura Group. “They delivered: they managed to thread the needle.
A far cry from the uproar of last March, when falling demand for fuel briefly threw the Organization of the Petroleum Exporting Countries and its partners into a bitter fight for customers.
Those bitter memories seem very distant as the network of 23 countries – jointly led by the Saudis and Russia – prepares to meet on Monday.
If there is a threat to the delicate balance reached by OPEC +, it is that the market could overheat and prices rise too high.
The alliance has indicated it will meet its schedule of modest production increases by approving another 400,000 barrels per day increase for November. But the market has changed since that roadmap was approved in July.
The shortage of natural gas, which has pushed prices up to the equivalent of $ 190 a barrel, is pushing towards petroleum products for heating and manufacturing, boosting aggregate demand.
U.S. oil production is still recovering from Hurricane Ida, which destroyed a total of nearly 35 million barrels after hitting the Gulf of Mexico a month ago, equivalent to almost two full months of increase of the OPEC + offer.
Some OPEC + delegates said privately that the increase approved at Monday’s meeting could be higher than the planned 400,000 barrels per day. Scenarios for larger hikes have been considered, an official said.
The Saudis themselves don’t want to see prices soar to $ 100 a barrel, as excessive fuel costs would reduce demand and spur a resumption of U.S. shale production, according to people familiar with the kingdom’s thinking.