Rewritten Article:
OPEC and major allies, including Russia, have decided to boost oil production in January, despite falling prices. This move could have significant implications for businesses dependent on crude oil.
The ensemble of oil-exporting nations agreed upon this decision during a meeting this week. Oil prices have been in a downward spiral since late October, plummeting more than 20%.
Global Brent oil futures, which have seen an approximately 70% surge since the start of the year, started to decline in November as the US and other major consumers agreed to release millions of barrels from their Strategic Petroleum Reserves. These actions aimed to bring down gasoline prices and prevent another rise in inflation.
However, with rising COVID-19 cases in Europe and Omicron variants posing potential threats to economic activity, losses have mounted.
In a statement, OPEC+ noted that they are continuously assessing the epidemic and closely monitoring the oil market, indicating a readiness to make necessary adjustments if required. The next meeting is scheduled for January 4th.
Analysts had anticipated that OPEC+ would pause a planned 400,000-barrel-per-day production increase in January due to the recent decline in oil prices and uncertainties regarding the epidemic and its impact on oil demand. The Brent and US oil futures, which had traded higher early Thursday, turned negative following the news, before recovering to around $69 and $66 per barrel, representing a rise of about 1%.
Unfortunately, this development won't provide immediate relief to American motorists, who fill up their tanks even as oil prices drop. While the average gallon price of unleaded gasoline dropped by two cents to $3.38 in the past month, it remains a far cry from a substantial decrease.
Temporary losses for OPEC and Russia could eventually translate into long-term gains, as their share of global production increases.
The International Energy Agency estimates that OPEC and Russia could represent 58% of the global oil supply by 2050, up from 46.5% in the previous year, as other countries, such as the US, invest less in exploration and production. The increasing demand from shareholders for higher oil production volumes and financial discipline further propels this trend.[1]
Investors' growing pressure to cut CO2 emissions and address climate change also adds to this shift in production dynamics.
[1] Source: International Energy Agency
