Oil prices recovered after trading lower following the public pressure from the United States on OPEC+ to raise oil supply more than the cartel had earlier planned, in order to check rising fuel prices.
Prices traded below $70 a barrel before Brent rose to $71.38 around 7.08 pm local time.
Unlike in Nigeria where subsidy is retained to check the impact of oil price rally at the retail end, the prices of gasoline trended higher in the United States and others, forcing the U.S. to call for higher production.
“We are engaging with relevant OPEC+ members on the importance of competitive markets in setting prices,” U.S. National Security Advisor Jake Sullivan said on Wednesday in a statement.
“Competitive energy markets will ensure reliable and stable energy supplies, and OPEC+ must do more to support the recovery,” Sullivan added, in what was one of the first direct calls from the Biden Administration on the OPEC+ alliance.
The views by the U.S. align with that of the Group Managing Director of Nigerian National Petroleum Corporation (NNPC) Mele Kyari, who had said that oil prices were “very high” and had started to constrain both producers and consumers.
“Producers are aware that when your prices are too high, you lose your customers. You have to bring it to a level that your customers can afford,” Kyari had said during a television interview.
Oil prices have risen more than 50 per cent in 2021, amid a recovery in demand buoyed by vaccine rollouts and OPEC+ supply discipline.
“The only way to pull down prices is to increase supply. So, that is what is going to happen. OPEC is going to intervene to see how we can bring down prices,” Kyari said.
Kyari said the rise in oil prices was hurting Nigeria, which relies heavily on fuel imports for its needs. Nigeria has four refineries with a combined nameplate capacity of 445,000 b/d, which are all offline after years of neglect, making the country fully reliant on refined product imports.
The U.S. had urged OPEC+ in the past to increase supply, most recently in April when Energy Secretary Jennifer Granholm called her Saudi counterpart Prince Abdulaziz bin Salman to highlight the importance of “affordable energy.”
Former President Donald Trump frequently used Twitter to call on OPEC to either raise or reduce production, depending on how tight, or not, the oil market was.
The 23-nation OPEC+ alliance led by Saudi Arabia and Russia agreed in July to revive the rest of the production they halted during the pandemic in careful installments, of 400,000 barrels a day each month.
Oil prices have softened in the past few weeks as the delta variant prompts fresh lockdowns in China and other key fuel consumers in Asia. Still, many analysts expect global markets will soon tighten as demand begins to pick up again. OPEC’s own data show its planned monthly hikes will fill only a fraction of the supply deficit over the rest of this year.
In its August Short-Term Energy Outlook (STEO), the United States Energy Information Administration (EIA) estimated that OPEC crude oil production will remain lower than calls on OPEC through the third quarter (3Q) and fourth quarter (4Q) of 2021.
This increased production from both OPEC and U.S. production will push international oil prices lower, the EIA noted, forecasting an average 2022 price for Brent of $66 per barrel as “continuing growth in production from OPEC+ and accelerating growth in U.S. tight oil production—along with other supply growth—will outpace decelerating growth in global oil consumption.”
Even so, the EIA expects that the global consumption of oil and liquid fuels will increase in 2022, by 3.6 million bpd from this year, to 101.2 million bpd. This year, however, thanks to the rebound in fuel demand, the EIA sees global consumption 5.3 million bpd higher than it was last year.