OPEC+ decided on Thursday to ramp up its monthly oil production increase to nearly 650,000 barrels per day (bpd) as the group looks to compensate for falling production in its key member Russia amid expectations of strong fuel demand this summer.
In another super-short meeting today, the ministers of the alliance agreed to boost the monthly production increases more than the usual 432,000 bpd, accepting the recommendation of the Joint Ministerial Monitoring Committee, which had met earlier in the day.
"The Meeting noted the most recent reopening from lockdowns in major global economic centers. It further noted that global refinery intake is expected to increase after seasonal maintenance," OPEC said after the OPEC+ ministerial meeting ended.
The key decision of the meeting is to "Advance the planned overall production adjustment for the month of September and redistribute equally the 0.432 mb/d production increase over the months of July and August 2022. Therefore, July production will be adjusted upward by 0.648 mb/d."
Under the production table for July provided by OPEC, Saudi Arabia, and Russia each have a quota of 10.833 million bpd next month, while the overall OPEC+ production quota is 43.206 million bpd.
Russia, however, is struggling with shut-in wells and production declines because of the Western sanctions over Putin's war in Ukraine. As of April, Russian production was already estimated to be around 1 million bpd below its OPEC+ quota.
Within OPEC+, only Saudi Arabia, the United Arab Emirates (UAE), and Iraq to some extent, are believed to have the spare capacity to boost production. Nearly all other members of the alliance have been struggling to meet their quotas even at the 400,000-bpd monthly production hike for OPEC+. At 650,000 bpd, it will be the Saudis and the UAE that will have to step up to compensate for others.
Following the OPEC+ decision, oil prices erased earlier losses and were trading slightly higher at 9:55 a.m. EST, suggesting that the market doesn't see the additional barrels as enough to offset supply losses from Russia, especially if most OPEC+ producers continue to fail to meet their quotas. The large increases for Saudi Arabia and the UAE also shift the focus again on shrinking global spare capacity, which is mostly in those two OPEC members.
The next meeting of OPEC+ is scheduled for June 30.
By Tsvetana Paraskova for Oilprice.com
More Top Reads From Oilprice.com:
Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More