The Organisation of Petroleum Exporting Countries (OPEC) and its allies announced yesterday that they will return 400,000 barrels per day to the global oil market in the month of February.
The alliance, therefore, decided to stick with its plan on gradual output increase first reached in April 2021. Oil futures rose yesterday, with global benchmark Brent crude topping $80 a barrel to trade at its highest price in over five weeks.
Under the new plan, Nigeria is expected to pump 1.7 million barrels a day in February, although lingering challenges may undermine the country’s capacity to meet the target, going by recent performances.
Despite a projected 1.86 million barrels daily oil production in the country’s 2021 budget, Nigeria recorded a deficit of almost 200 million barrels in the first 11 months of 2021, due to production challenges.
The deadline for compensation over previous overproduction will be extended until June, according to reports. The alliance is scheduled to meet on February 2 to set production levels for March.
The decision to stay the course with a 400,000 b/d monthly increment comes after the group’s forecasters played down concerns over the impact on oil demand from the Omicron variant of Covid-19.
Yesterday’s meeting to decide February quotas was “smooth”, according to two delegates. The previous gathering in December was more difficult, coming just days after the emergence of Omicron.
Because of the uncertainty surrounding the new variant and its potential impact, OPEC+ ministers kept the December meeting “in session” to monitor the market closely and make “immediate adjustments” if needed.
OPEC Secretary-General, Sanusi Barkindo, noted that world oil demand is estimated to have grown 5.7 mb/d in 2021 and to grow by 4.2 mb/d in 2022.
Non-OPEC liquids supply growth in 2021 is forecast at 0.7 mb/d y-o-y to average 63.7 mb/d. The non-OPEC supply growth forecast for 2022 remains around 3.0 mb/d, to average 66.7 mb/d. OPEC crude oil production increased by 275 tb/d in November m-o-m to average 27.72 mb/d, according to secondary sources.
Saudi energy minister Prince Abdulaziz bin Salman officially closed the December meeting yesterday, delegates said, before declaring the new meeting open.
On Monday, the group’s Joint Technical Committee (JTC) reviewed an OPEC secretariat report, which played down the disruption from Omicron.
The report forecast that the effect of the variant would “be mild and short-lived, as the world becomes better equipped to manage Covid-19 and its related challenges”.
As a result, the OPEC secretariat kept its forecast for global oil demand growth in 2022 unchanged from its previous projection, at 4.2mn b/d. “Growth previously expected in the fourth quarter of 2021 now shifted to the first quarter of 2022,” it said.
But the secretariat sees much tighter supply-demand balances for this year compared with its previous projections. In its base case scenario — one of three discussed in the report — the secretariat put the global surplus at 1.4mn b/d in the first quarter, down markedly from the 3.1mn b/d oversupply forecast last month. For the full year, the surplus is also forecast at 1.4mn b/d, down from OPEC’s previous projection of 1.7mn b/d.
