The OPEC+ group decided on Tuesday to add another 400,000 barrels per day to its total oil production in February in a widely expected move to continue easing the cuts each month.
At the end of a very short ministerial meeting, the OPEC+ alliance did not deviate from its current plan to ease the production cuts by 400,000 bpd each month until it unwinds all the supply curbs. The move was widely expected by the market, and oil prices were up by around 1% just after news of the decision broke.
Before the meeting started today, Saudi Arabia’s Energy Minister, Prince Abdulaziz bin Salman, officially closed the previous meeting from December 2, which OPEC+ had left “in session,” signaling it could revisit last month’s decision to raise production by 400,000 bpd in January if Omicron hits global oil demand hard. At 33 days, the meeting that opened on December 2 was the longest-ever, at least on paper, in the history of OPEC and OPEC+.
The meeting today opened and closed and didn’t produce any surprises about the OPEC+ group’s immediate oil supply policy. The alliance will continue to raise production by 400,000 bpd in February and extends the compensation period until June 2022.
During the meeting, non-OPEC producer Kazakhstan was called out for its low compliance with the cuts, and was pressured to improve its conformity level, Amena Bakr, Deputy Bureau Chief and Chief Opec Correspondent at Energy Intelligence, reported, citing delegates.
Days before today’s meeting, the general market sentiment, and expectations were that the alliance would likely proceed with its oil production policy of the past few months by deciding to add another 400,000 bpd to production quotas in February.
The next meeting of OPEC+ is scheduled to be held on February 2, when the group is expected to decide production levels for March.
By Tsvetana Paraskova for Oilprice.com
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Therefore, there was no surprise in OPEC+’s decision today to add another 400,000 barrels a day (b/d) to its total oil production in February and will continue to do exactly that throughout 2022 unless circumstances in the market force it to change course.
Today’s decision is another vote of confidence by OPEC+ in the robustness of both the market and oil demand and a confirmation that the impact of Omicron variant’s on demand has so far been very mild despite its fast transmissibility.
OPEC+’s policies are geared towards ensuring a continued demand-supply balance and stable crude oil prices around $80 a barrel if not a bit higher for Brent crude which is the price the overwhelming majority of its 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