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OPEC and Russia ratify oil supply increase in August

The increase had already been agreed on 2 June
Joint Technical Committee meeting prior to the 29th OPEC/non-OPEC Ministerial Meeting, 1 June 2022

PHOTO/OPEC  -   Joint Technical Committee meeting prior to the 29th OPEC/non-OPEC Ministerial Meeting, 1 June 2022

The OPEC+ alliance, led by Saudi Arabia and Russia, confirmed Thursday that in August it will increase its oil supply by 648,000 barrels per day of crude, to a total of 43.85 million barrels per day (mbd).

"In light of current market fundamentals," it confirmed "the decision to adjust monthly global production upwards for the month of August 2022 by 0.648 mbd," the Organisation of the Petroleum Exporting Countries (OPEC) said in a statement.

In addition, OPEC ministers and its 10 allies, including Russia and Mexico, agreed in their video conference today to meet again electronically on 3 August.

The increase had already been agreed on 2 June, under mounting pressure from the West to open the taps further to curb rising energy prices and inflation, so it came as no surprise to markets.

In theory, with the August increase, OPEC+ (without Venezuela, Iran and Libya, which are not participating in the deal) would eventually recover the level of pumping it had before reducing it in 2020 by almost 10 mbd to cope with the historic collapse in demand and prices for "black gold" that caused the coronavirus crisis.

REUTERS/AHMED YOSRI - Fotografía de archivo, 12º Simposio de la OPEP sobre Perspectivas Energéticas de la AIE en Riad, Arabia Saudí
REUTERS/AHMED YOSRI - File photo, 12th OPEC IEA Energy Outlook Symposium in Riyadh, Saudi Arabia

But with most producers facing serious capacity constraints, the group has been pumping below quota for several months, raising doubts that it will be able to meet the promised supply volumes.

On paper, the alliance's total quota as of 1 August will be 43.85 mbd, of which 26.69 mbd corresponds to OPEC (without Venezuela, Iran and Libya) and the rest to the allies.

Saudi Arabia's share rises to 11 mbd, identical to Russia's, despite the fact that Moscow has already acknowledged that its extractions are falling and will continue to fall as a result of the sanctions imposed on it by the European Union for its invasion of Ukraine.