OPEC and allied oil-producing countries decided Thursday to gradually increase the flows they send to the world, even as Europe’s plan to sanction Russian oil threatens to yank millions of barrels off a global market already thirsty for crude.
The cautious approach from the OPEC+ alliance — which includes non-member Russia — will exacerbate a global energy crunch, with prices expected to rise further for oil and the gasoline, diesel and aviation fuel made from it. Those higher prices will worsen global inflation, eating away at people’s ability to spend money that would otherwise support the economic recovery.
At an online meeting, OPEC+ stuck with its road map to gradually open the oil taps, agreeing to add 432,000 barrels per day in June. The plan is to make those regular increases to restore cuts made in 2020 during the worst of the pandemic recession.
Oil prices have risen — more than 40% this year — as the boost in production remains smaller than what the U.S. and other oil-consuming countries are pressing for to ease high prices at the pump.
Bigger surges in oil prices have been held back by COVID-19 lockdowns in China cutting demand and the U.S. and other member countries of the International Energy Agency releasing oil from strategic reserves.
Still, analysts from Rystad Energy foresee the global market potentially losing up to 2 million barrels within six months if the 27 European Union countries approve a proposal to sanction Russian oil. Moscow is expected to see production fall after losing its biggest oil customer — Europe.
OPEC has made it clear to European officials that the oil cartel is not going to increase production to compensate for lost Russian oil. Some OPEC members already can’t meet their oil production quotas.
Russia is the world’s largest oil exporter with some 12% of global supply, and fears its oil and natural gas could be cut off have kept energy prices high.
Before the invasion of Ukraine, Russian sent around 3.8 million barrels of oil per day to the European Union, where refineries turn it into gasoline and diesel fuel.