The OPEC+ group will likely proceed with its oil production policy of the past few months by deciding next week to add another 400,000 barrels per day (bpd) to its collective output quota, OPEC+ and Russian sources told Reuters this week.
OPEC and its Russia-led non-OPEC partners in the OPEC+ alliance are meeting on January 4 for their regular monthly meeting to decide how to proceed with unwinding the production cuts for the following month.
So far, all indications point to OPEC+ sticking to its policy to continue unwinding the oil production cuts by 400,000 bpd each month.
“At the moment, I have not heard of any moves to change course,” one source at OPEC+ told Reuters. Two other sources at OPEC+ and a Russian oil source who spoke to Reuters said that no changes to the current agreement were planned to be made on January 4.
OPEC+ stayed the course in early December, even in the face of plunging oil prices due to fears of Omicron and the announcement of releases of strategic petroleum reserves from oil-consuming nations led by the United States.
The OPEC+ alliance decided on December 2 to stick to its initial plans to add 400,000 barrels per day to its collective oil production each month, to the surprise of some analysts who had expected a pause in the monthly supply additions.
After the meeting, oil prices erased losses and bounced back after OPEC+ said it could immediately revisit the planned 400,000 bpd increase for January if demand suffers.
Analysts interpreted the wording as OPEC+ leaving the door open to a flexible approach to production.
An ambition to provide the global oil market with clear guidance on future production plans and discipline in sticking to already agreed upon policies is the reason OPEC+ did not respond to U.S. calls to boost oil production more than planned, Russia’s Deputy Prime Minister and top OPEC+ negotiator Alexander Novak said earlier this week.
By Tsvetana Paraskova for Oilprice.com
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During its meeting on January 4, OPEC+ will take a close look at the market and decide as to whether to go ahead with increasing its production by 400,000 barrels a day (b/d) or to freeze the increase if the market shows signs of glut. Therefore, a decision to increase production isn’t a fait accompli on January 4.
As in 2021 OPEC+’s main objective in 2022 will be to ensure a balance in the market between supply and demand and relatively stable crude oil prices around $80 a barrel for Brent crude which is the price the overwhelming majority of OPEC+ members with the exception of Russia need to balance their budgets.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London