The organisation of petroleum exporting countries and allies (OPEC+) agreed on Wednesday to raise crude oil production volume for September by 100,000 barrels per day. The decision comes following a disturbing energy crisis that has spread across the world amidst inflation pressures.
The 23-nation alliance will divide that amount proportionally between members, and with only the Saudis and the United Arab Emirates able to bolster production, just a fraction of it is likely to be delivered, according to the oil group.
For July and August, the group had pledged to add more than 600,000 barrels a day to the market. Recall that OPEC+ delegates said before the meeting that they saw no immediate need to replace supplies from coalition member Russia, which have proven robust despite sanctions over its invasion of Ukraine.
Opening the taps freely could also have strained relations with Moscow. Delegates had also said prior to the meeting that the group’s limited reserves of spare production capacity were best kept for later in the year when crude markets look set to tighten as the US winds down its release of emergency stockpiles.
Idle supplies in the Middle East are down to “razor-thin” levels of about 2 million barrels a day, or 2% of world demand, according to the International Energy Agency. OPEC+ ministers noted in their final communique after Wednesday’s meeting that “the severely limited availability of excess capacity necessitates utilizing it with great caution.”
Today’s meeting noted the dynamic and rapidly evolving oil market fundamentals, necessitating continuous assessment of market conditions. The oil group noted that the severely limited availability of excess capacity necessitates utilizing it with great caution in response to severe supply disruptions.
It said chronic underinvestment in the oil sector has reduced excess capacities along the value chain. The meeting highlighted with particular concern that insufficient investment into the upstream sector will impact the availability of adequate supply in a timely manner to meet growing demand beyond 2023.
It noted that preliminary data for OECD commercial oil stocks level stood at 2,712 mb in June 2022, which was 163 million barrels lower than the same time last year, and 236 million barrels below the 2015-2019 average and that emergency oil stocks have reached their lowest levels in more than 30 years.
Member countries agree to an upward adjustment of the production level for OPEC and non-OPEC participating countries by 0.1 million barrels per day for the month of September 2022.