Oil prices plunged dropping more than a $1 after reports that the White House “will call on OPEC and its oil-producing allies to boost production in an effort to combat climbing gasoline prices, amid concerns that rising inflation could derail the economic recovery from Covid-19.”
According to the report, officials from the Biden Administration spoke with representatives from OPEC’s de facto leader Saudi Arabia this week, as well as with representatives from the United Arab Emirates and other OPEC+ members.
The White House said the group’s July agreement to boost production by 400,000 barrels per day on a monthly basis beginning in August and stretching into 2022 is “simply not enough” during a “critical moment in the global recovery.”
“We are engaging with relevant OPEC+ members on the importance of competitive markets in setting prices,” National Security Advisor Jake Sullivan said in the statement obtained by CNBC. “Competitive energy markets will ensure reliable and stable energy supplies, and OPEC+ must do more to support the recovery.”
Gas prices are soaring as demand for petroleum products returns, with the national average for a gallon of gas stood at $3.186 on Tuesday, according to AAA, up from $3.143 a month ago.
Over the last year, prices are up by just over $1. In May, the national average crossed the $3 mark for the first time since 2014, and as every politician knows, the fastest way to lose any election is at the gas pump.
“The president recognizes that gas prices can put a pinch on the family budget,” a senior White House official said. “He’d like his administration to use whatever tools that it has to help address the cost of gas, to help bring those prices down.”
Meanwhile, despite recently agreeing to gradually boost output gradually amid concerns of uneven demand in a world still plagued by a pandemic, OPEC+ is still withholding about six million barrels per day from its pre-covid output levels, which it plans to gradually return to the market.
The group’s latest meeting ended in disarray after the UAE took issue with its baseline quota, briefly sending the oil market into turmoil. The group eventually came to an agreement later in July.
In response to the CNBC report, Brent futures tumbled 1.6%. However, with the latest API data showing that motor fuel stockpiles fell by 1.11 million barrels last week, pushing prices 2.7% higher on Tuesday, prices may not fall for longer.
That would be the fourth weekly draw, the longest run of declines since September, if confirmed by official figures due later Wednesday.