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The White House applauded OPEC+’s decision to continue adding 400,000 bpd to global supply next month as well, with Reuters reporting the administration cited “close” coordination with Saudi Arabia and the UAE.
OPEC and its partners, led by Russia, yesterday decided to stay the course of adding oil production in line with original intentions after the worst of the pandemic was over. The cartel remains confident that demand for crude is strong enough to keep prices elevated even with the supply additions.
However, many members of the group have been struggling to add as much production as their quotas call for. In November 2021, the members of the OPEC+ agreement complied with the production cuts at 117 percent, Amena Bakr, Deputy Bureau Chief and Chief Opec Correspondent at Energy Intelligence, reported on Tuesday, quoting delegates at the monthly OPEC+ meeting.
The high conformity level with the cuts—over 100 percent—suggests that OPEC+ is actually producing lower volumes overall than the collective quotas.
The ten OPEC members bound by the OPEC+ pact—and excluding exempted producers Iran, Venezuela, and Libya—complied with the cuts at a massive 122 percent, while the conformity level of the non-OPEC members led by Russia was 107 percent, Energy Intelligence’s Bakr notes.
Other analysts have also expressed slight worry that OPEC is overcomplying with the cuts, therefore undercomplying with output addition quotas. The reasons for this are the lack of field and equipment maintenance in some members who have had other problems to tackle over the last few years, including Iraq, Nigeria, and Angola.
The bigger worry is that with these members struggling to boost production, the spare capacity of those who can produce more will run out more quickly than previously anticipated with the regular production additions. This means that the White House’s enthusiasm about the continuance of OPEC+’s policy may be a little premature if demand remains strong throughout the year.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.