Page 12 - NorthAmOil Week 05 2022

NorthAmOil POLICY NorthAmOil

OPEC+ makes quick decision but

adding production will be harder

GLOBAL THE OPEC+ group this week agreed to ease an oil price above $100 per barrel in Q3, noting
their collective production restraint by a fur- that spare capacity could reach historic lows of
ther 400,000 barrels per day (bpd) in March in a around 1.2mn bpd around that time.
meeting that lasted just 16 minutes. S&P Global Platts quoted delegates as saying
The 23 members’ rapid decision came as oil that there had been no discussion on countries
prices rose beyond $90 per barrel on the back using spare capacity to fill supply gaps left by
of geopolitical concerns in the Middle East others failing to reach their targets, with Sau-
and Eastern Europe. Despite the move, supply di-based Jadwa Investment this week suggesting
concerns are likely to linger, with a Bloomberg the Kingdom’s output could average 10.3mn bpd
survey suggesting that the 13 OPEC members in 2022.
were only able to achieve a production increase While it is likely that Middle Eastern nations
of 50,000 bpd in January, as output from Nigeria could make short-term gains – Kuwait and Saudi
rose by 160,000 bpd during the month. However, Arabia are pressing ahead with field expansion
the group actually ended up registering a drop projects, both domestically and in their shared The 23 members’
of 90,000 bpd following the shutdown of Libya’s Partitioned Neutral Zone (PNZ), while Iraq has
Sharara oilfield. already said it intends to export around 100,000 rapid decision
The wider OPEC+ group fared even worse, bpd more in February – OPEC will need to play
underproducing by more than 820,000 bpd in a delicate balancing act between the market and came as oil
January. its relations with Russia.
As smaller producers struggle to raise their One of Platts’ sources said that this rela- prices rose
output, Middle Eastern countries may need tionship could be strained if OPEC members beyond $90
to ramp up disproportionately, with industry begin overproducing and claim Russia’s share
estimates suggesting that 90% of the group’s of the market. “I do not imagine that Russia per barrel on
spare capacity is now held by Saudi Arabia and will accept the principle that countries which
the UAE. The pair have maximum production have additional spare capacity can increase the back of
capacities of 12mn bpd and 4mn bpd respec- their production when it cannot do so,” he
tively, though work is ongoing in both countries said. geopolitical
to add another 1mn bpd each. The group is unlikely to be rushed into any concerns.
According to data compiled by IGM Energy, knee-jerk moves, though, with JP Morgan’s
OPEC+’s top five producers in January were: Christyan Malek telling the FT: “OPEC+ is not
Russia (just over 10mn bpd); Saudi (just under in any rush to raise production too quickly or to
10mn bpd); Iraq (4.3mn bpd); the UAE (2.9mn backfill for members that might be struggling to
bpd) and Kuwait (2.6mn bpd). meet their targets, no matter the concerns over
With Middle East oil ministers and executives Ukraine or the return of $90 oil. They have a plan
calling out IOCs for underinvestment in new they want to stick to and don’t want to be seen to
production globally, Goldman Sachs anticipates be pushed around.”™

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