Save for later Print Download Share LinkedIn Twitter While Opec-plus has committed to adding 2 million barrels per day by the end of the year to alleviate oil market tightness, some of this won't materialize due to weaker members' inability to produce at higher levels. Years of underinvestment is coming back to haunt Nigeria, Angola, Iraq and Malaysia, which won't be able to meet their rising production quotas under the latest Opec-plus deal, Energy Intelligence reckons (PIW Jul.16'21). The 19 member nations with quotas are forecast to produce an average 36.8 million b/d from August through December, which is 700,000 b/d below the group's average quota of 37.5 million b/d for the period. Starting in August, Opec-plus agreed to add 400,000 b/d per month into 2022, with a policy review to come at year's end. Opec’s Mideast heavyweights, led by Saudi Arabia, and non-Opec allies Russia and Kazakhstan, can fill their larger allotments, but others can not. The situation potentially opens the door for stronger producers to overproduce to make up for weaker members' shortcomings or could lead to a tighter market. Energy Intelligence forecasts that third-quarter production for the 19 members will average 36.7 million b/d, or 630,000 b/d below target. The shortfall will increase to 780,000 b/d in the fourth quarter. By year's end, the alliance’s output will be about 1.8 million b/d higher than in July. Nigeria and Angola are in the worst shape, while Iraq and Malaysia are beginning to creak under the strain. In July, these four collectively produced 825,000 b/d beneath their quotas, Energy Intelligence calculates (PIW Aug.13'21). Over August-December, as their targets grow, the shortfall will average 850,000 b/d. While each producer has unique reasons for its upstream woes, underinvestment is the common denominator. In Nigeria, the Bonny terminal suffered a defective buoy mooring earlier this year, while aging pipelines are constraining Qua Iboe supplies. Observers say port operators have been reluctant to invest given energy transition risks and the planned launch of the massive 650,000 b/d Dangote refinery, which will keep a chunk of exports at home (PIW Nov.27'20). In Angola, production is near a 17-year low at 1.08 million b/d due to weak investment and technical glitches at mature fields. Some support will come from start-up of TotalEnergies’ Zinia Phase 2, which is under way. In Iraq, ramshackle infrastructure has crimped output, while the country’s aggregate field production capacity has fallen due to underinvestment, operational issues and forced cutbacks to meet its Opec-plus commitments (PIW Mar.5'21). Reaching its quota of 4.2 million b/d by year-end is achievable, barring any mishaps, and drilling projects are underway at Majnoon and elsewhere. But sustaining pre-pandemic output levels of 4.6 million b/d will be a challenge without major new investments. Malaysia’s fields are maturing without replacements. These members' production woes, if combined with strict compliance by other Opec-plus members, could alleviate oversupply fears in the coming months as the Covid-19 Delta variant delays the recovery in global oil demand (PIW Jul.23'21). Delta’s uncertainty has sparked volatility in the futures market, with Brent returning above $70 per barrel this week after a steep slide. If Brent holds firm in the coming days, the next Opec-plus meeting, scheduled for Sep. 1, could pass without much drama. But trouble could arise at year's end for members struggling to produce at targeted levels. Nigeria is aiming to pre-empt this scenario by arguing for a higher baseline at the next meeting (IOD Aug.23'21). Balances show global inventories drawing at 2.6 million b/d in the third quarter, and 1.4 million b/d in the fourth quarter if Opec-plus sticks to its current policy and weaker members fall further behind, as expected. By year's end, Opec-plus will have a better view of the first half of 2022 -- which would not be able to handle more supply, balances suggest -- and could adjust output ceilings accordingly. Excluding the four underperformers, the bloc's adjusted spare capacity -- that which can be produced within a month and sustained for 90 days -- still registers at 6.69 million b/d. Opec-plus could tap some of this if Iran returns to the market later than the fourth quarter. A nuclear deal with the US in the near term could see Iran add 1.5 million b/d by the end of 2022, but the prospects look increasingly murky (PIW Aug.20'21).