Saudi Arabia, UAE agree to substantially increase oil production

Saudi Arabia and the United Arab Emirates have agreed to “substantially increase” oil production if necessary.

The countries agreed to pump more oil if there is a global supply shortage this winter.

Saudi Arabia, the United Arab Emirates, and other OPEC nations have a spare capacity of up to 2.7 million barrels per day (BPD).

Russia is experiencing an intensification of sanctions, driving up the price of its primary exports.

Russia is the world’s third-largest oil producer and exporter and is also a significant coal producer.

The United States and its European allies are contemplating a ban on its massive oil and gas industry.

Saudi Arabia to provide oil worth $100m per month

Russia is a significant player in global commodity markets. It is one of the largest exporters of vital raw materials, including wheat, grains, oil, natural gas, coal, gold, and other precious metals.
The invasion of Ukraine resulted in unprecedented sanctions aimed at isolating Russia and stifling its access to international financial markets.

While sanctions have not directly targeted Russia’s energy exports, the US and its European allies are considering a ban on Russia’s oil imports, the US announced on Sunday. Russia is the world’s third-largest oil producer and among the largest gas producers. A prohibition would cause customers to scramble for any alternative, regardless of cost.

Brent crude futures reached their highest level since the middle of 2008 on Monday, when they surpassed $130 per barrel on the mere possibility of a ban.

Russia leads in oil production

However, the situation is not so straightforward. Russia is not only dominant in the oil industry. It is among the top producers of wheat and coal. Some experts believe that Western leaders will refrain from imposing complete embargoes because the resulting price increases would damage their economies.

Fereidun Fesharaki, chairman of the energy consulting firm FGE, told Bloomberg last week that Russia is too large to be sanctioned.

The global market cannot exist without Russian oil, and Europe cannot live without Russian gas.

According to Reuters sources, OPEC leaders Saudi Arabia and the United Arab Emirates have pledged to deliver a “significant increase” in oil output should the world face a supply crunch this winter.

According to sources, the two countries could deliver “considerably more,” but only if the supply crisis worsens over the next few months.

“With the possibility of no gas in Europe this winter and a possible price cap on Russian oil sales in the New Year, we cannot dump every barrel on the market right now,” a source told the outlet.

Its climate envoy states that Saudi Arabia is committed to stabilizing international oil markets.

According to reports, Saudi Arabia, the UAE, and other OPEC members have a spare production capacity of up to 2.7 million barrels per day. The recent announcement resolves these issues.

“The only time we can demonstrate that we have more spare capacity is during a protracted crisis,” sources said.

According to OPEC data, Saudi Arabia produced approximately 10.6 million barrels daily in July. The United Arab Emirates was the second-largest producer after Iraq, producing about 3.1 million daily barrels.

Countries are concerned about their winter supply due to a global energy crisis precipitated by Russia’s war with Ukraine, which has subsequently stifled supply. Particularly, Europe feared that Russia would completely cut off the region’s gas supply in response to Western sanctions.

Germany, in particular, is suffering from the effects of the energy crisis, which has prompted leaders to devise emergency plans to conserve gasoline before winter.

In response to a tight oil market, OPEC+ announced in its most recent meeting that it would increase production by 100,000 barrels per day in September, causing oil prices to rise above $100.45 per barrel on Wednesday.

At the time of writing, Brent crude futures were down 1.4% to $95.38 per barrel, while West Texas Intermediate crude futures were down 1% to fall below $90 per barrel for the first time since late February.