5th Dec 2022

EU fails to convince OPEC to boost oil production

The group of major oil-exporting countries, OPEC, has ruled out a further increase in oil production, saying there is sufficient supply to the market and that other factors, including US foreign and economic policies, are to blame for record price hikes.

"All you need to do is look at the data to be convinced that the market is well-supplied in oil, that we have enough surplus capacity and we have enough stocks in the market," Chakib Khelil, the president of the Organisation of Petroleum Exporting Countries (OPEC), said on Tuesday (24 June).

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  • One barrel of 'black gold' currently sells for almost $140 (Photo: Notat)

Speaking after discussion with the European Union in Brussels, Mr Khelil cited the recent US sub-prime mortgage crisis, financial market speculation, the weak US currency and worsening geopolitical situation as main factors behind the high prices.

One barrel of 'black gold' currently sells for almost $140. The price of petrol has passed from ten dollars in 1999 to 95 dollars last year.

When asked about how much the price will jump over the summer holiday season, Mr Khelil replied: "It is the sixty-billion dollar question".

"The market is waiting to see how the dollar is to evolve in July, how the geopolitical situation is going to evolve with the threats made to Iran. So if you can answer those questions, I can answer the question concerning the price," he said.

The EU, for its part, insists that the oil price is to large extent driven by fast growing energy consumption in China and India. It has repeatedly called for supplies to be boosted.

No reason for ceilings, says EU

EU energy commissioner Andris Piebalgs urged OPEC to scrap the production ceiling in order to provide relief for the market.

"In my opinion, there is no reason to keep ceilings on production," he said.

"If there are no ceilings, markets will adapt much faster," he added. "In this respect we could expect prices to go down, not to go up as the tendency has been till now."

"We need to work much closer to discover what action should be taken because investments take billions and to change consumer behaviour also takes time," the commissioner added.

He also suggested stronger supervision of activities in financial markets and reiterated the EU's intention to decrease oil import dependency through its energy-climate change package.

Under the package, the EU has committed itself to boosting renewable energy production and cutting energy consumption.

In response to the EU's plans, the OPEC president said: "All of this of course is going to lower the demand, but I think it is a good thing to lower the demand. We just have some more supplies and maybe some lower prices."

"The EU is doing a very good job and should continue this way," Mr Khelil added, underlining the potential benefits for OPEC members of having new technologies linked to energy efficiency and CO2 emission cuts.

ECB says more rate hikes to come

European Central Bank president Christine Lagarde said more rate hikes will come, but also admitted a recession will not lower inflation — leaving some economist question the logic of the policy.

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