Karachi, October 06, 2022 (PPI-OT): Pakistan OIL and GAS: OPEC+ striving for high oil prices

WTI oil prices have traded up by 9% since the start of the month, in anticipation of production cuts from the OPEC+ countries. Ahead of the meeting, the widespread expectation was for a 1mn bpd cut from the group, however the OPEC+ surprised by announcing a 2mn bpd voluntary cut.

The greatest cuts have been volunteered by Saudi Arabia and Russia, of about 526k bpd each. Other notable cuts are expected from Iraq and UAE, of ~220k and 160k bpd, respectively.

US retaliated by hinting towards ramping up the rate at which it has released its Strategic Petroleum Reserves (SPR) of oil, currently standing at 416.4mn bbls as of Sep’22 end. The country has been managing international prices by releasing its SPR since September last year, when it held ~620mn bbls in SPR.

Demand for oil is expected to increase in the winters this year, as natural gas prices have increased to levels where usage for power production and heating is no longer viable. To note, natural gas prices averaged US$7.88/MMBTU in Sep’22, compared to the five-year average of US$3.48/MMBTU.

High crude oil prices pressure the economy, in the form of higher import bills (Petroleum group imports made up 30% of total imports in FY22), along with inflationary pressures.