The deal to increase production followed an agreement to add about 430,000 bpd each month until August this year to reverse the deepest output cut in history, implemented in 2020 and totaling 9.7 million barrels per day. It also follows a decision taken in June to increase output from an initial 432,000 bpd to 648,000 bpd. Once again, this decision was attributed to consumer countries led by the United States, which repeatedly called on OPEC to pump more oil so that prices would fall. The problem is that only two OPEC members have the capacity to pump more oil than they do now, and 100,000 bpd may remain on the cards, as can 648,000 bpd. Commodities analysts at Standard Chartered had predicted that OPEC and its OPEC+ partners would do the bare minimum in response to calls for more output. This decision to add 100,000 bpd to combined production could well be seen as that minimum showing that they are doing something to address consumer concern about supply, but not so much that prices are rising. Because of the delicate balance between doing something that works and doing too much, oil markets look likely to remain tight for the next two years at least, StanChart analysts said in their latest commodity roadmap. The good news for consumers is that next year may bring lower prices due to dynamic demand. Demand for oil in the current quarter may have fallen by 100,000 bpd, StanChrt estimates, while OPEC output last year rose by 2.2 million bpd. The cartel and its partners will have to be careful about their next steps to avoid both destroying demand through excessive prices and the reputation of withholding barrels to keep prices high. However, prices have more or less normalized in recent months, the report notes. Right now, Brent crude is trading just a few dollars above levels seen before Russia invaded Ukraine. This suggests that the market has absorbed the war premium and fundamentals are back in the driving seat. The big problem, then, seems to be the lack of means by most OPEC members to boost production above current levels, even if they wanted to. In July, the latest month for which official OPEC data is available, the cartel produced 234,000 bpd more than in June. This was close to the original quota for OPEC under the OPEC+ agreement, which was 253,000 bpd. And that was the month OPEC was supposed to produce more than the original 253,000 bpd. But it didn’t, and few who closely watched the OPEC deal were surprised, given Nigeria’s chronic problems with pipeline theft and disruptions, or Libya’s political situation, which has caused regular production outages for years. Venezuela and Iran have been exempted from OPEC+ production cuts, but they have other problems preventing them from making the most of their oil: US sanctions. Angola, like Nigeria, has a chronic oil problem, which in its case is a lack of investment in the face of depleting fields, and Iraq, too, needs money to produce more oil. So any increase in oil production that comes from OPEC will come from Saudi Arabia, the United Arab Emirates and possibly Kuwait. Whether such an increase would be enough to drive oil prices much lower than they are now remains to be seen and will largely depend on demand developments in the coming months. By Irina Slav for Oilprice.com More top reads from Oilprice.com:
