OPEC+ Continues To Struggle To Produce As Much As Quotas Allow

The OPEC+ group continues to deliver lower supply increases than the monthly production quotas, according to the alliance’s estimates of compliance with the November crude oil output quotas.

In November 2021, the members of the OPEC+ agreement complied with the production cuts at 117 percent, Amena Bakr, Deputy Bureau Chief and Chief Opec Correspondent at Energy Intelligence, reported on Tuesday, quoting delegates at the ongoing monthly OPEC+ meeting.

The high conformity level with the cuts—over 100 percent—suggests that OPEC+ is actually producing lower volumes overall than the collective quotas.

The ten OPEC members bound by the OPEC+ pact—and excluding exempted producers Iran, Venezuela, and Libya—complied with the cuts at a massive 122 percent, while the conformity level of the non-OPEC members led by Russia was 107 percent, Energy Intelligence’s Bakr notes.

This suggests that the OPEC members in OPEC+ faced more difficulties in pumping as much as their quotas dictated than the non-OPEC producers.

The OPEC+ group has been undershooting its collective production targets for months and will likely continue to do so in the months ahead, analysts say. African OPEC members lack the capacity and investments to boost production, Russia is estimated to pump and export lower volumes than its quota, and the biggest Arab Gulf producers have the means to raise output but at the expense of shrinking their spare production capacity, which accounts for the majority of the spare capacity globally.

The alliance’s inability to deliver on its production targets—with some estimates putting the overall output at around 650,000 bpd-730,000 bpd below the collective quota—is set to support oil prices next year, analysts say. This underproduction could even become a major upside for oil this year, especially if Omicron’s dent to global oil demand remains limited to jet fuel, as the most recent estimates and analyses showed at the end of 2021.

By Tsvetana Paraskova for Oilprice.com