Oil prices soared to a seven-year high above $90 a barrel last month, stirring expectations of a return to triple-digits, as supplies from OPEC+ and elsewhere failed to keep up with the vigorous recovery in demand from the pandemic. The rally is whipping up the wave of inflation that’s frustrating central banks and inflicting a cost-of-living crisis on millions.
Nonetheless, OPEC and its partners are likely to reach an agreement “to extend the current production policies for the short period to come,” Iraq Oil Minister Ihsan Abdul Jabbar said Tuesday.
The alliance’s preference for caution is explained by its outlook for the rest of the year. While trading houses anticipate prolonged tightness, its Joint Technical Committee estimated on Tuesday that supplies will exceed demand by 1.3 million barrels a day in 2022, a forecast only slightly upgraded from a month ago.
OPEC’s 13 members increased production by only 50,000 barrels a day in January as slight gains across the group were wiped out by a 140,000 barrel-a-day decline in Libya, according to the survey. They pumped 28.14 million barrels a day in total. The North African nation was stricken with a blockade of its western fields by militias, forcing the shutdown of its biggest reservoir, Sharara.
The 10 OPEC nations engaged in managing supplies increased by 160,000 barrels a day, about two-thirds of the targeted amount. One bright spot was Nigeria, where production rose by 100,000 barrels a day, with the key Forcados export system returning to normal operating levels.
The figures are based on ship-tracking data, information from officials and estimates from consultants including Rystad Energy AS and JBC Energy GmbH.
Russian oil producers pumped 46.53 million tons of crude and condensate in January, according to preliminary data from the Energy Ministry’s CDU-TEK unit. That could convert to 10.05 million barrels a day, or 50,000 below its quota for the month. The full 23-nation OPEC+ is cutting far more than required, with a compliance rate of 122% in December, according to data presented to an internal committee on Tuesday.
Widespread difficulties in restoring supplies increasingly place the burden on the group’s Gulf nations: Saudi Arabia, the United Arab Emirates, Iraq and Kuwait. As gasoline prices become an increasingly sensitive point in the U.S., they could come under pressure from Washington to open the taps. Goldman Sachs Group Inc. said the meeting might easily yield a bigger-than-expected hike.
“In this market they have to compensate for the barrels others can’t produce,” Sara Akbar, chief executive officer of Oil Serv Kuwait, said in a Gulf Intelligence webinar. “I think today they will make this decision somehow.”
But this prospect in turn is leaving traders anxious over the spare capacity they hold to cover any disruptions, whether deeper losses in Libya or another attack like last month’s drone strike in Abu Dhabi.
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