Amid geopolitical tensions rocking markets, the 23 OPEC+ countries decided to increase their production slightly and cautiously.
The decision is likely to support prices that are reaching their highest levels in the past seven years.
The alliance’s declaration did not come as a surprise given that OPEC+ has strictly followed this approach since an agreement was reached. However, the issue remains whether the alliance is able to keep pace with the planned production increases.
Decisions of OPEC+
During its virtual meeting, the alliance, headed by Saudi Arabia and non-members states headed by Russia, decided to add 400 thousand barrels per day in March.
The alliance stressed the critical importance of fully complying with production quotas and the compensation mechanism, and benefiting from the extension of the compensation period until the end of June 2022.
It has also decided to hold its ministerial meeting on March 2, to discuss production policy and markets’ development.
Distribution of production shares in March
The size of OPEC production and its outside producers shall increase to 41.294 million barrels per day this upcoming March. This means an additional 400 thousand barrels more than the current month. This is pursuant to the production shares decided upon in the agreement seen by “Economy Middle East.”
OPEC indicated that the production of the members of OPEC (10) will rise to 25.061 million barrels per day.
As per the report, the increase in the production of the 13 non-members states in OPEC shall reach 16.233 million barrels daily in March.
Saudi Arabia and Russia’s next month’s production shall reach 10.331 million barrels daily each, compared to 10.227 million barrels per day slated for February. This translates into an increase of approximately 104 thousand barrels.
An increase in the production shall read as follows:
- Iraq to 4.370 million barrels per day (from 4.325 million barrels/day)
- The UAE to 2.976 million barrels/day (from 2.946 million barrels)
- Kuwait to 2.639 million barrels/ day (from 2.612 million barrels)
- Nigeria to 1.718 million barrels/day (from 1.701 million barrels)
- Angola to 1.435 million barrels/day (from 1.421 million barrels)
- Algeria to 992 thousand barrels/day (from 982 thousand barrels)
- Congo to 306 thousand barrels/day (from 303 thousand barrels)
- Gabon to 175 thousand barrels (from 173 thousand)
- Equatorial Guinea to 120 thousand barrels/day (from 118 thousand)
As for producers from outside OPEC, the production shall read as follows:
- Mexico 1.753 million barrels/day (from 1.753 millions)
- Kazakhstan 1.605 million barrels/day (from 1.589 million)
- Azerbaijan to 675 million barrels per day (from 668 thousand)
- Bahrain to 193 thousand barrels per day (from 191 thousand)
- Brunei to 96 thousand barrels per day (from 95 thousand)
The report also mentioned that Malaysia shall produce 559 thousand barrels per day in March while the Sultanate of Oman shall produce 829 thousand, Sudan 71 thousand, and South Sudan 122 thousand barrels per day.
The OPEC+ decision came as oil prices reached their highest levels in seven years in January.
Production and supply strategies
The alliance produces more than 40 percent of the global supply. It is facing pressure from big consumers such as the USA and India to “pump” more crude oil to help the economic recovery from the pandemic.
However, OPEC+ refuses to abide by more rapid increases and considers that the world is facing an energy shortage due to a poorly calculated transition to less polluting fuels in consuming countries.
On the other hand, the OPEC+ Joint Ministerial Monitoring Committee recommended continuation with the current production policy.
There is growing confidence that the OMICRON variant would not affect oil demand as strongly as initially expected.
In fact, OPEC is expecting global oil demand to increase by 4.2 million barrels per day this year. Meanwhile, the International Energy Agency (IEA) estimates demand growth in 2022 at 3.3 million barrels per day.
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