The OPEC Joint Ministerial Monitoring Committee is recommending an increase in production by 648,000 barrels per day -higher than what was originally agreed, according to Tweets from Amena Bakr, Chief OPEC Correspondent at Energy Intelligence.
The proposed 648,000 bpd output increase would be for July, and another 648,000 bpd increase in August. All members of the JMMC were in agreement, according to reports.
Under the proposal, OPEC+ would bring forward the planned September hike and spread it across July and August, resulting in an 648,000 bpd increase in each of those months. There would be no planned hike, then, in September.
Until Thursday, the overarching sentiment from the masses was that OPEC's JMMC would rubber-stamp the 423,000 bpd output increase that was already baked into the agreement. But reports began to filter in, led by the Wall Street Journal, that OPEC was considering exempting Russia from the agreement. Those reports later morphed into rumors that OPEC might agree to increase production to make up for what would surely be Russia's lost oil production in the wake of Western sanctions, including the EU's Russian oil import ban that was agreed to earlier in the week.
According to Amena Bakr, the proposal for a 648,000 bpd increase was discussed as being an overall increase for the OPEC+ group, to be divided among its members equally. In reality, however, there are numerous OPEC+ members that cannot meet their current quotas and are highly unlikely to meet a new, even higher quota.
Such an increase would, however, afford Saudi Arabia, the UAE, and Iraq-all of which are thought to have excess spare oil production capacity-the ability to increase production.
If this proposal is agreed to by the OPEC+ ministers, it will come as a relief to the White House, which has been begging OPEC-especially Saudi Arabia-for additional oil output as the United States continues to battle high gasoline prices in the runup to mid-term elections.
Oil prices were trending down on Thursday morning on the prospect of additional oil coming from the group.
By Julianne Geiger for Oilprice.com
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Comments
Since then, these deficits have been building up. Then Western sanctions were imposed on Russia because of the Ukraine conflict. Russia is now producing 10.05 million barrels a day (mbd), just 390,000 b/d shy of its OPEC+ production quota of 10.44 mbd.
What OPEC+ is proposing to do is raising production by the cumulative deficits of members who are under-producing and adding them to those who can produce more, in effect maintaining the average 400,000 b/d. The figure comes to 648,000 b/d over for each of the months of July and August.
Saudi Arabia, UAE and Iraq are expected to raise their production to achieve these new figures. However, there are question marks as to whether these three countries can. The maximum both Saudi Arabia and UAE combined can raise their production is 200,000-350,000 b/d. As for Iraq, I am not sure it can since it is one of the OPEC+ members who weren’t meeting their production quota.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London