Saudi Arabia is prepared to raise its oil production if Russia's output falls substantially because of the western sanctions imposed on it, the Financial Times reported on Wednesday, citing sources. Oil prices fell on Thursday as investors cashed in on the recent rally ahead of a key producers meeting later today.
Production increases scheduled for September would be brought forward to July and August, the paper said.
Others expect OPEC+ - a grouping of the Organization of the Petroleum Exporting Countries (OPEC) and associated allied producers, including Russia - will keep its production policy unchanged.
Five OPEC+ sources said on Wednesday that OPEC was set to stick to its modest monthly increases in oil output, despite seeing tighter global markets.
Saudi Arabia, the top producer in OPEC, has previously rebuffed calls by Washington to boost oil output by more than the gradual increases it has agreed to as a member of the OPEC+ group which includes Russia.
The Wall Street Journal reported on Tuesday that some OPEC members were considering suspending Russia from the agreed production plan, to allow other producers to pump significantly more crude, as sought by the United States and European nations.
But two OPEC+ sources told Reuters a technical meeting on Wednesday had not discussed the idea. Six other OPEC+ delegates said the idea was not being discussed by the group.
Europe’s planned ban on Russian oil imports and easing of Covid-19 restrictions in China threaten to add to the already surging consumer prices.
A further rally in oil prices would be met with dismay in oil-consuming nations, especially since the rise in retail fuel prices has far exceeded increases for crude.
Economists at Rabobank predict Europe’s ban on Russian seaborne oil imports will plunge the 19-nation euro area into a recession at the end of this year. They now see full-year growth of 2.2% for 2022 and a 0.1% contraction in 2023.
Bloomberg Economics estimates that a $10-a-barrel gain in headline oil prices in the third quarter would add about 0.2 percentage points to inflation in Europe and 0.4 percentage points in the US.
-Reuters/Bloomberg