Russia’s war and China’s lockdowns shake up oil markets as OPEC+ meets | Health, Medicine and Fitness
LONDON (AP) — OPEC and allied oil-producing nations, including Russia, weigh conflicting forces Thursday as they decide how much crude to move to volatile global markets. Europe’s proposal to phase out Russian oil and other Western sanctions are choking off supply, while China’s COVID-19 shutdowns are reducing demand.
The result has been fluctuating and high oil prices, crushing consumers in the United States and Europe with rising inflation and the increased costs of driving and heating homes. It’s eating away at people’s ability to spend elsewhere, including in stores that are still rebounding from the pandemic.
Analysts expect the 23-nation alliance known as OPEC+ to stick to a fixed schedule of modest production increases, amounting to an additional 432,000 barrels of oil a day in June. The incremental increases are intended to offset the deep production cuts made at the height of the pandemic recession in 2020.
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Oil prices have risen as the increase in production remains below what countries like the United States are asking for mitigate high prices at the pump. Some OPEC+ members have also been unable to meet their allocated quotas. Two members, Saudi Arabia and the United Arab Emirates, have almost all of the group’s unused capacity.
Raising production beyond quotas would complicate relations between members, and OPEC made it clear to European officials that the oil cartel was not going to increase production to compensate for the loss of Russian oil.
the war in ukraine has been a driving force in oil markets in recent days, and more so after the European Union’s executive board proposed on Wednesday phase out imports of Russian crude oil within six months.
Beyond the EU oil boycott, Western financial sanctions have deterred banks and insurers from supporting the oil trade with Russia. Some buyers shunned Russian oil because they don’t want to be associated with the Kremlin.
The International Energy Agency said some 3 million barrels a day of Russian oil could be forced off the market starting this month “due to international sanctions and the impact of a growing embargo imposed by customers”.
The Paris-based organization said that “while some buyers, particularly in Asia, have increased their purchases of heavily discounted Russian barrels, traditional customers are cutting back.”
Meanwhile, COVID-19 restrictions are weighing on fuel consumption in China and undermining oil demand. The government discouraged people from traveling during the May Day holiday, while in Beijing major tourist sites such as the Forbidden City and the Beijing Zoo closed their indoor exhibition halls and are operating at partial capacity.
The release of oil from strategic reserves by the United States and other member countries of the International Energy Agency is also helping to dampen larger increases in oil prices.
But “higher prices could be around the corner,” said Bjornar Tonhaugen, head of oil markets research at Rystad Energy. “The oil market has not fully priced in the potential for an EU oil embargo, so crude prices should be expected to rise over the summer months if passed.”
U.S. oil prices were little changed on Thursday, rising 0.1% ahead of the meeting to $107.90 a barrel, more than 40% higher year-to-date. International benchmark Brent rose 0.4% to $110.51 a barrel.
For U.S. consumers, the average gasoline price was $4.19 a gallon on Wednesday, up $1.29 from a year ago. The price of crude oil is approximately 60% of the price at the pump in the United States.
Diesel for trucks and farm equipment rose again, by $2.34, to $5.43 a gallon.
Drivers in Europe, where taxes make up a larger proportion of the price at the pump, also pay more. Petrol prices are on average 1.95 euros per liter in Germanyor the equivalent of $7.77 per gallon, while diesel was at 2.02 euros per liter, or $8.05 per gallon.
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