OPEC+ is producing less oil than it is supposed to, a survey by Platts has revealed, as cited by Forex Live.
The oil cartel was supposed to pump a combined 37.141 million barrels in September per its quotas, according to Argus. Yet, according to the Platts survey, the actual total was 570,000 bpd below this number—even if it was higher than the previous month by more than the 400,000 bpd OPEC+ agreed to add to the market every month.
In other words, while OPEC+ was overperforming on its monthly production boost, it was underperforming on its own quotas.
The September total, per the Argus data, was 6.712 million barrels lower than the baseline production level agreed to by OPEC+.
The cartel has made no secret of its intention to go cautiously about production recovery. Its members appear still worried about the demand prospects for oil despite the recent price surge resulting from the gas supply crunch.
It was this worry about demand that made OPEC+ stick to its original output recovery scheme of adding 400,000 bpd to monthly production until combined output rises by 5.8 million bpd. That would still mean a lower output than before the pandemic—OPEC+ slashed 7.7 million bpd from its production to counter the pandemic—and could keep prices higher for longer.
In other words, OPEC+ is still prioritizing its own well-being despite calls for adding more barrels to curb a price rise that saw Brent crude top $80 per barrel and West Texas Intermediate pass this threshold for the first time in more than five years.
The most notable call to OPEC to pump more came from Washington earlier this year, not once but twice. Now, Reuters reports, the White House remains eager to have OPEC "do more" to help global economic recovery, according to an unnamed official.
The official said Washington was "using every tool at our disposal to address anti-competitive practices in U.S. and global energy markets to ensure reliable and stable energy markets."
By Irina Slav for Oilprice.com
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Still, OPEC+ has two overriding objectives. One is to look after the interests of its members by trying to maximize their revenues and this means preventing oil prices from falling below $80 a barrel if possible since this is the price the majority of its members with the exception of Russia need to balance their budgets. The other objective is to balance the markets by preventing it dipping into either a glut or a deficit. Community
That is why OPEC+ decided to stick to its original decision of adding 400,000 barrels a day (b/d) for November with continued rises in production until it has recouped the remaining 5.8 million barrels a day (mbd) from its total production cuts sometime in 2022.
The market should make no mistake about OPEC+ determination to defend a Brent crude price of $80 but it will definitely intervene to prevent Brent surging far above $80.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London