The Organization of Petroleum Exporting Countries [OPEC] and its allies are trying to prevent crude prices to climb to $100 a barrel, and are reviving production quickly enough to prevent global markets from “overheating,” Oman’s oil minister said.
Oil prices edged lower on Thursday as investors took profits after two days of gains amid fears of aggressive U.S. interest rate hikes, but the losses were cushioned by expectations that a strong economic recovery will boost demand.
U.S. West Texas Intermediate (WTI) crude futures were down 29 cents, or 0.4 per cent, to $82.35 a barrel by 1:43 p.m. ET (1843 GMT), after rising 5.6 per cent over the last 2 days.
Brent crude futures fell 2 cents, or 0.5 per cent, to $84.65 a barrel. It had gained 4.7 per cent over Tuesday and Wednesday.
The OPEC and its allies, a 23-nation group led by Saudi Arabia and Russia, continues to restore output halted during the pandemic at a gradual pace of 400,000 barrels a day though in practice its increases have been restricted by internal unrest and depressed budgets. Crude prices have rallied this year, topping $80 a barrel in London.
“We’re very careful at OPEC+, we will look at each month as we go,” Omani Oil Minister Mohammed Al Rumhi said in an interview in Riyadh. “But so far, I think 400,000 is good because demand is increasing and we want to make sure that the market is not overheating. We don’t want to see $100 a barrel. The world is not ready for that.”
Oil’s rally has alarmed many consuming nations as it stokes inflationary pressure that’s menacing the world’s economic recovery from the pandemic. Part of the problem has been a crunch in global production capacity following a run of reduced spending, Al Rumhi said.
Over the past five years “investments have been limited in the industry and we’re paying the price for it now,” Al Rumhi said.
It’s an issue afflicting OPEC+ themselves.
OPEC made only part of its planned output increase last month as Nigeria and Libya were beset by disruptions. Many members of the wider coalition — such as Angola and Malaysia — are also seeing production falter because of diminished investment. Even Russia struggled to boost volumes last month.
Separately, Oman is planning its first ever international bidding round for minerals, with companies from Japan and the U.K. having shown interest in investing in silicone extraction.