Page 6 - LatAmOil Week 13 2022

LatAmOil COMMENTARY LatAmOil

OPEC+ kicks off meeting

with focus on supplies

All eyes are on the cartel and its allies as they navigate the choppy waters

of crude oil price volatility and supply disruptions from its own members

THE OPEC+ group meets in Vienna this week
to decide on May production levels at a pivotal
WHAT: point for oil markets. With consumers begging
This week’s meeting will for more crude supplies to ease the current sup-
determine production ply/demand pinch, OPEC and its allies remain
quotas for May and will in the driving seat as numerous members have
likely have ramifications reasserted their commitment to output restraint.
for oil prices. It appears unlikely that they will now throw
caution to the wind and deviate from plans to
WHY: increase production quotas by a combined
There are plans to raise 400,000 barrels per day (bpd). However, May is to distance themselves from having to take a
the baseline levels for the the month that renegotiated baselines come into position against Russia, with Saudi Energy Min-
OPEC+ quotas, but with effect, potentially adding a combined 1.6mn bpd ister Prince Abdulaziz bin Salman Al Saud say-
the group having failed to
hit its targets, there are to target levels. ing that OPEC+ is not a platform “for the moral,
concerns about playing ethical and political issues; when it comes to
that hand too early. No shocks expected OPEC, we have managed to compartmentalise
Oil price volatility has persisted despite ongoing our political differences for the last 35 years.”
WHAT NEXT: peace talks between Russian and Ukraine and “When we get into the building for our meet-
Uncertainty about is unlikely to dissipate in the short term, with ings, we leave politics outside of the door and
Russian supplies and summer air conditioning requirements likely that culture has been with us. If we don’t do that,
a reduction in Kazakh to cause a spike in crude burn, while increased we will not have dealt with so many countries
exports are likely to weigh travel will raise fuel demand. at different times,” he added during a summit
heavily on the group’s Meanwhile, around 1.2-1.5mn bpd of Rus- in Dubai. Prince Abdulaziz noted that Saudi
ability to hit its quotas in sian crude is believed to have been removed Arabia and the UAE had found ways to main-
the coming months. from the market because of sanctions and bans tain OPEC and OPEC+ arrangements with Iran
on imports from the country in light of the despite its funding of Yemen’s Houthi militia,
conflict in Ukraine, and roughly 3mn bpd is which has carried out numerous attacks on the
seen being sold to Asian instead of European countries and their oil infrastructure.
customers. Meanwhile, Al-Mazrouei said during the
Prices have been driven up further as exports same event: “Countries have the right to select
from Kazakhstan, the second-largest producer from the resources they buy, but we cannot
on the non-OPEC side, are seen falling by decide for all and say you cannot buy these bar-
around 320,000 bpd in April, according to the rels – that is outside the OPEC.”
country’s energy ministry, as work is carried
out to repair loading facilities at the port of Baseline boost
Novorossiisk. While the OPEC+ will set the tone, and by
However, the OPEC+ deal has aided the extension a price range, for the coming month,
post-pandemic recovery among producer scrutiny has been unsurprisingly levelled at
nations and there has been little sign of a shift the group’s ability to produce at or around its
in policy. Indeed, UAE Energy Minister Suhail self-imposed targets.
Al-Mazrouei said: “We are experts in our field Data from OPEC’s Joint Technical Com-
and we have been doing it for a long time.” He mittee showed that OPEC+ production in Jan-
added: “We’re trying to balance the market and uary missed the 23-nation group’s 40.493mn
it’s not an easy job. When we say this is the right bpd quota by 972,000 bpd, while S&P Global
way to do it, we know from experience, so trust Insights reported this week that the February
us.” target had been missed by 1.05mn bpd.
This underproduction is coming under
No politics sharper focus as discussions about the baseline
The group’s Middle Eastern leaders have sought adjustment become current.

P6 www. NEWSBASE .com Week 13 31•March•2022