OPEC oil production slows, paving way to price hikes at the pump
The Organization of the Petroleum Exporting Countries (OPEC) produced less oil last month than planned under the current output deal, a new survey found, even as more members reject calls to hike production over the agreed limit.
OPEC states produced 27.5 million barrels per day (bpd) in October, marking a monthly increase of 190,000 bpd, according to a Reuters survey. However, the increase fell short of the planned 254,000 bpd boost requested under the supply deal with the group’s allies, or OPEC+.
The OPEC+ agreement pledged earlier this year to gradually increase oil output by 400,000 bpd each month starting in August, of which about 254,000 bpd is shared by the 10 OPEC members covered by the deal. The rest falls on the bloc’s non-member allies, including Russia.
The shortfalls are explained by unexpected outages experienced by some of the smaller OPEC producers. Output declined or did not increase in the Republic of Congo, Equatorial Guinea and Gabon due to a lack of production capacity. The biggest output decline of 70,000 bpd was in Nigeria due to a pipeline shutdown. A pipeline leak caused another major decline in Libya. On the other hand, OPEC’s two largest producers, Saudi Arabia and Iraq, both boosted output as promised according to the deal.
The alliance, which introduced a production increase to ease the oil market amid recovering global demand after the Covid-19 pandemic, is also uneager to pump too much oil in case the pandemic resurges. Last year, at the height of the crisis, oil producers were forced to remove some 10 million barrels of oil from the market as lockdowns put downward pressure on demand.
Current supply increases have so far helped support oil prices, which are trading near $85 a barrel – nearly a three-year high. Still, some consumers, including Japan, India and the United States, have been urging the alliance to supply more crude. US President Joe Biden repeatedly voiced calls for OPEC+ to ease last year’s supply curbs more quickly.
“The idea that Russia and Saudi Arabia and other major producers are not going to pump more oil so people can have gasoline to get to and from work, for example, is not right,” Biden said at the G20 Summit on Sunday.
However, over the past few days more OPEC members have been stating they do not plan to boost output over the proposed limit. Most recently, Kuwait said OPEC should stick with the plan to increase production gradually because oil markets were already well-balanced. Angola’s oil minister, Diamantino Pedro Azevedo, also said that the current OPEC+ output-increase plan “is working well and there is no need to deviate from it.” Similar statements earlier came from Iraq, Algeria and Nigeria.
The oil alliance is scheduled to meet this Thursday to review the current production policy, and analysts expect members to reconfirm their current plans for monthly increases.
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