- Oil is trading higher one day ahead of the OPEC+ meeting.
- Saudi Arabia and Russia are the two key players in this meeting.
- The betting is on Saudi Arabia to increase crude oil pumping to supply Russia.
Oil futures are up 2% on Tuesday on traders’ uncertainty ahead of tomorrow’s OPEC+ producers’ meeting. The meeting is expected to lead to a larger-than-existing boost in crude supply.
Sources close to some producing countries argue that a new boost seems unlikely.
OPEC+ has cut this year’s market surplus forecast by 200,000 barrels (bpd) to 800,000 bpd. Brent futures are up just over 1% to a price above $101 per barrel. West Texas Intermediate (WTI) crude is trading around $95.50 up 1.5%.
The oil market is going through a turbulent year 2022 since the Russian invasion of Ukraine in February. After that event, Brent reached a record high of $147.50 per barrel. However, the impact of global inflation led central banks to adjust interest rates upwards, causing a slowdown in growth.
The focus is on what Saudi Arabia and Russia can come up with. The Arab country is facing pressure from the West to increase its oil supply and Russia is facing blockades and embargoes from Europe.
Western countries are pressuring Saudi Arabia to increase the volume of crude oil as a way of not having to depend on Russia, a country with which there is a relationship of a point of no return after its invasion of Ukraine.
Geopolitical factors also play a role, such as the recent visit to Taiwan by U.S. Congress Speaker Nancy Pelosi. China has taken this visit as an international provocation.
While hopes are pinned on the Arab kingdom, there is also some skepticism that Saudi Arabia will achieve remarkable relief in the energy markets.
In July an increase of 0.648 million barrels per day was established, which came into effect in August. This pumping was key to recover the level that existed before the pandemic.
On the other hand, many producers are pumping less due to a lack of technical capacity.
It should also be taken into account that both Saudi Arabia and the United Arab Emirates – the only ones with the capacity to produce more barrels – will not want to risk too much as their alliance with Russia, signed in 2016, is at stake.