In the shortest meeting so far in its history, OPEC+ decided on Wednesday to increase the collective production by 400,000 barrels per day (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.
The ministers of the OPEC+ alliance, who met via video conference, rubberstamped in just 16 minutes the monthly production hike of 400,000 bpd for March. 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.
Earlier this week, 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.
OPEC+, however, confirmed the 400,000-bpd increase in record time and didn’t even plan a press conference after the meeting.
Brent Crude prices returned to $90 per barrel just after news of the modest production increase and the record-short meeting broke.
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, leaving 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.
Going forward, the market will be closely looking at how much of that increase OPEC+ can actually deliver, considering that half of its members have lagged in ramping up output to their quotas so far, while more producers—with few exceptions such as Saudi Arabia and the UAE—will be struggling to raise production.
Per the production table provided by OPEC, the leaders of OPEC+ -- Saudi Arabia and Russia – will each have a quota of 10.331 million bpd in March.
The next OPEC+ meeting is scheduled for March 2.
By Tsvetana Paraskova for Oilprice.com
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This begs the question as to whether OPEC+ has the spare production capacity to deliver these production increases and my answer is that in the short term OPEC+ has enough capacity to keep the market balanced in 2022 and possibly 2023. Long term, it needs an expansion of capacity and this will take up to five years to achieve.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London