Opec-Plus Falling Further Behind With New Supply

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Opec-plus has brushed off consumer concerns about high oil prices and approved another nominal increase of 400,000 barrels per day in the alliance's production for the month of March. But oil markets are fixated on the group's inability to deliver the additional volumes it has promised, a problem that has existed since it started unwinding production cuts last August — and a key driver of benchmark Brent's rise to around $90 per barrel. Energy Intelligence reckons that Opec-plus output will only rise by about 200,000 b/d next month. The group's production was running 900,000 b/d short of its target in January, and that shortfall will nearly double by March as more members max out their wellhead capacity. Wednesday's monthly Opec-plus meeting lasted just 16 minutes, reflecting a unanimous desire to stick with the previously agreed pace of production increases. Delegates said there was no discussion of recent Opec-plus underproduction, nor of high oil prices or the issue of spare capacity. "There were no objections from anyone on keeping the policy unchanged," one noted. But production capacity has become the elephant in the room for oil markets. Opec-plus co-leader Russia will be next to hit the wall. Russia can produce at a maximum sustained rate of 10.2 million b/d, our assessment shows. It is struggling to hit 10 million b/d now, although part of this is due to cold weather. Azerbaijan is set to max out in April; Iraq in June; Algeria in August; and Kuwait in September. In Africa, Nigeria and Angola continue to wither — together these two were 670,000 b/d short of their combined target in December. Non-Opec member Malaysia was 125,000 b/d short of its quota. When the current deal ends in September, Kazakhstan and Oman would be the last countries standing with limited spare in the second half of 2022, alongside Saudi Arabia and United Arab Emirates, the undisputed champions of spare capacity. Together these two Mideast producers will wield about 2.3 million b/d in capacity that could be brought on stream in 30 days and sustained for at least three months.

Opec/Opec-Plus, Opec/Opec-Plus, Oil Supply, Oil Prices, Oil Demand
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