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OPEC+ is largely expected to rubber-stamp next week its decision to boost production in August by 648,000 bpd, five Reuters sources said on Thursday.
Of course, that’s what sources said leading up to the previous meeting as well—although the group decided to raise production by more than planned.
At the previous meeting, OPEC+ agreed to increase its production by 648,000 bpd for July and another 648,000 bpd in August. This compared to expectations for a 432,000 bpd increase.
The current proposal has OPEC+ bringing forward its planned hike for September, spreading it across both July and August. But even if next week’s OPEC+ meeting confirms this tentative plan for August, it is unlikely to hit that target.
For May, OPEC+ produced 2.7 million bpd below its target. For June, the UAE’s energy minister said the group was still pumping 2.6 million bpd below its target. Then it raised its target by another 648,000 for July—and the August target is another 648,000 bpd higher than that.
Some would argue that this significant underproduction not only speaks to the group’s lack of market-managing spare capacity, but also to the low probability that the group will hit its new target in August. In order to achieve this target, the group would need to increase its production by nearly 4 million barrels per day over what it is producing today.
Since OPEC+ started reversing last year the record cuts from April 2020, the group has been consistently struggling to meet its production quota as many members lack spare capacity or investment to increase production. Only three members—Saudi Arabia, the UAE, and Iraq—are thought to have meaningful capacity to spare.
By Julianne Geiger for Oilprice.com
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Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group.