Page 6 - AfrOil Week 40 2022

AfrOil COMMENTARY AfrOil

OPEC+ makes 2mn bpd

cut, angering the US

Months of badgering by Western leaders counted for naught this week as OPEC+ announced a

2mn bpd quota reduction that serves to bolster prices and cover up issues raising production

THE OPEC+ group of oil producers made the were required “in light of the uncertainty that
decision to cut combined output by 2mn bar- surrounds the global economic and oil market
WHAT: rels per day (bpd) when they met in person this outlooks.”
The head of NNPCL spoke week for the first time since the coronavirus With sanctions constraining the market
to Parliament about the (COVID-19) pandemic began. It comes despite for Russian crude as its military operation’”in
extent of oil theft near fears about the state of the global economy and Ukraine continues and Moscow moves to
Forcados. follows a lengthy period during which Middle annexe four south-eastern regions of its neigh-
Eastern oil producers in particular have been bour, Riyadh has refrained from criticism, per-
WHY: urged to increase output as they near theoretical haps with an eye on the stability of oil relations
Price volatility, concerns output highs. and another on its own long-running military
about future upward The reduction was the group’s second in as campaign in Yemen.
production and dedica- many months, with September’s decision wiping Russia was reported to be keen to cut out-
tion to the long-standing out the 100,000 bpd added to output in August. put by 1mn bpd, while Saudi Arabia had been
deal are all thought to
have been factors in the Over the previous 18 months, OPEC+ had rumoured to be considering an additional, uni-
decision. been working to return around 10mn bpd of lateral cut in the region of 500,000 bpd.
supplies taken off the market to stem the mas- The two countries account for more half of
WHAT NEXT: sive losses experienced by oil exporting nations the OPEC+ group’s 43.86mn bpd production
The US has called out when crude prices plummeted in the second quota for October at 11mn bpd each, but while
the move, threatening quarter of 2020. The slow build-back ensured Saudi Arabia has been able to produce around
action to reduce OPEC’s that prices rose steadily, but renewed volatility this level of late, Russian output has fallen as
influence on the market. amid conflict and concerns about demand has sanctions bite.
necessitated action in the opposite direction, With both countries’ quotas now falling to
as many market commentators opine that the 10.478mn bpd, there will be less pressure on
group now views $90 per barrel as a non-nego- Saudi Arabia to maintain production at lev-
tiable price floor, though Riyadh has vehemently els nearing all-time highs as prices sit in what
denied any desire to control prices. Riyadh likely sees as a middle ground. Other
producers that have been maxing out, most
Criticism and collaboration notably Kuwait, will also welcome the respite
The cut drew immediate criticism from major given issues in raising output.
consuming nations, led by the US, whose Pres-
ident Joe Biden lobbied hard earlier in the year Cuts
to encourage OPEC+ members to raise output. While OPEC+ will reduce their collective quota
The White House published a statement by by the headline 2mn bpd, underproduction
National Security Advisor Jake Sullivan and among members will see output fall by around
National Economic Council Director Brian 1.0-1.1mn bpd, according to Saudi Arabian
Deese, which said Biden had been “disappointed Energy Minister Prince Abdulaziz bin Salman
by the short-sighted decision by OPEC+ to cut Al-Saud.
production quotas while the global economy is The group fell around 3.6mn bpd short of
dealing with the continued negative impact of its 43.856mn bpd quota with Iranian, Russian
[Russian President Vladimir] Putin’s invasion and Venezuelan sales remaining constrained by
of Ukraine.” The true source of this disappoint- sanctions and Angola and Nigeria dealing with
ment is likely to be the upward pressure it will production issues.
have on fuel prices just over a month before
Biden faces a challenging mid-term election. Action points
However, despite widespread pressure, the The output reduction – and consumers’ dis-
group’s top producers – Saudi Arabia and Rus- pleasure – only serves to highlight the pres-
sia – have stuck by each other, appearing to have cience of Saudi Aramco CEO Amin Nasser’s
learnt from the folly of their short-lived price recent repetition of criticism that the challenges
war that coincided with the start of the pan- in supplying the market are largely borne of
demic, and members said that the reductions long-term upstream underinvestment.

P6 www. NEWSBASE .com Week 40 06•October•2022