In a direct jab at Texas, the cartel of oil-producing nations called OPEC+ intends to raise its crude output by a modest amount starting next month. The cartel has raised oil output almost every month so far this year.
It’s not just West Texas that the oil producers are targeting, but it sure looks like an attempt to regain shares of the market lost long ago to the Permian Basin and its prolific shale output.
They’re in a bind because they want to raise the amount of oil on the market so they can sell more of it, but they have to be careful not to put out too much crude because too much crude might lower the worldwide price of oil — and that hurt OPEC+ member Russia, which is helping finance its war against Ukraine with oil profits.
Patrick DeHaan, petroleum analyst at GasBuddy, says the cartel used a failed strategy “when they cut oil production back in 2020 and that cut into oil production back then, but it didn’t really do much back then, so OPEC has thrown up the white flag and decided to raise production, kind of thinking that if oil prices aren’t going to go up, we might as well produce more” and take in more money in the process.
But one of the “side bonuses of dropping prices by adding oil to the market is, that makes it less attractive for companies to drill inside the US,” so a lot of oil well have been shut in over the past year or so, because OPEC+ nations can drill oil cheaper and can
DeHaan says a constructive way of looking at the OPEC+ actions is to see it as a response to President Donald Trump’s “Drill Baby Drill” oil mantra, which could be a form of cooperation led by US ally Saudi Arabia.
At the same time, though, another OPEC+ member, Russia, is looking to keep prices as high and steady as possible.
“Ukranian drone attacks on Russian oil refineries have now become more significant, causing fuel shortages in Russia because of a lack of refined product,” DeHaan said.