OPEC+ Likely To Stand By Plans To Only “Gradually” Increase Production, Despite Crude Volatility

OPEC+ is likely to stand by its plan to only “gradually” increase oil production despite the mounting volatility in the commodity as a result of Russia’s invasion of Ukraine.

Several delegates said that when OPEC+ meets this week, it will “probably” not wind up modifying its plans of adding 400,000 barrels per day to the market, Bloomberg reported. 

Seemingly as part of their justification for holding steady, delegates said that last week’s spike in prices “was triggered mostly by geopolitics and did not reflect an imbalance between supply and demand”. 

The 23 nation alliance, which includes Russia, will meet on Wednesday to talk about its output goals for April. However, as Bloomberg notes, Saudi Energy Minister Abdulaziz bin Salman does have a history of “surprising markets”. 

OPEC+ has been under pressure from importers of late to help reduce the cost at the pump. But nations like Saudi Arabia have so far ignored the pressure, stating they are committed to the OPEC+ agreement and what the alliance determines. Unilateral rises in production are unlikely, delegates said. 

OPEC+ is pumping almost 1 million barrels a day below its target, the International Agency Energy said this month. Many nations are struggling to reach their quotas, the report says. 

Recall, in January, we wrote Harris Kupperman said that oil prices were “out of OPEC’s hands” at this point due to increased demand. 

“Governments around the world are stimulating demand. They’re going crazy. They’re printing money and subsidizing users. At the same time, they’re making it amazingly painful for producers to produce oil. They’re withholding permits and blocking pipelines,” he said. “They’re already talking about excess profits taxes and carbon taxes are next. Why would anyone increase production under these circumstances? Hence, non-OPEC production isn’t going up much.”

He concluded: “So, OPEC is left to make up the balance. They can talk about raising production by 400k/d, but they’re already almost out of spare capacity. They aren’t even hitting their own internal targets. It’s increasingly out of their hands at this point. Oil is going higher.”