Date: 15 February 2022 Author: Grzegorz Kuczyński

OPEC+ Did Not Give In To Output-Increasing Pressure

In the shortest meeting in its history, OPEC+ decided to increase the collective production by 400,000 barrels per day (bpd). The ministers of the OPEC+ alliance, who met via video conference, agreed in just 16 minutes on the monthly production hike. The decision to keep the gradual output increase despite growing global demand made oil prices soar rapidly. The leaders of OPEC+, which are Saudi Arabia and Russia, will each have a quota of 10.331 million bpd in March.

In its shortest meeting ever, OPEC+ decided on February 2 to boost the production by 400,000 bpd in March, keeping unchanged the plan to boost output and pushing Brent above $90 per barrel again with the per-usual modest production hike. Some analysts, and possibly traders, had expected a higher production increase, considering the recent rally in oil prices to $90 that has surely frustrated major oil-consuming nations, including the United States. Ahead of the meeting, Goldman Sachs had expressed the view that OPEC+ might decide to announce a larger production increase for March than the usual 400,000 bpd, considering the oil price rally to $90 and the potential for renewed discontent from major oil importers at these high price levels. While the nominal increase is modest, as in the previous seven months, many producers within the OPEC+ group are struggling to pump to their quotas––last year, Russia achieved its maximum capacity. To raise production, it is compelled to open new fields. All this leaves an increasingly large gap between production increase on paper and actual growth in output, which leaves the market tighter than many analysts and forecasters had anticipated just a few months ago. Shortly, the market will be closely looking at how much of that increase OPEC+ can deliver, considering that half of its members have lagged in ramping up output to their quotas so far, while others––with few exceptions, including Saudi Arabia and the United Arab Emirates––will be struggling to raise production. The next OPEC+ meeting is scheduled for March 2.

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