The International Energy Agency (IEA) says that the Organization of Petroleum Exporting Countries and its allies (OPEC+) will most likely not carry out the expected oil output increase in the coming months due to limited spare capacity.
In fact, the 100,000 barrels per day (bpd) production target increase that OPEC+ set for September may end up effectively being a production cut as Russian production declines.
This disclosure is contained in the IEA monthly report for August 2022 that was released on Thursday.
This is as crude oil prices remain below the $100 per barrel mark with the United States putting pressure on oil producers to increase output.
What the IEA report is saying
IEA in the monthly report said, “Comparatively low levels of operational spare production capacity, held mainly by Saudi Arabia and the United Arab Emirates, may thus all but rule out substantial further OPEC+ output increases in the coming months.’’
The IEA also said that the production cut forecast will place the burden of meeting the anticipated 2.1 million bpd 2023 global oil demand growth in the second half of the year rests squarely on the shoulders of other oil producers outside the OPEC+ group.
It, however, noted that while they were still expecting a decline in Russian crude oil production, it had revised its outlook for world oil supply upwards, with Russia’s supply declines now seen as more limited than it previously forecast.
The Paris-based organization which provides data, analysis and recommendations on the global energy sector pointed out that Non-OPEC+ supply is projected to rise by 1.7 million barrels a day in 2022 and 1.9 million in 2022. That’s a significant improvement compared with last year, but still falls short of 2.1 million barrels a day of demand growth expected in 2022 and 2023.
What you should know
- OPEC+ had in its last meeting which was held on August 3, 2022, acknowledged its ‘severely limited’ spare capacity which necessitates using it with great caution in response to severe supply disruptions.
- The meeting noted that chronic underinvestment in the oil sector has reduced excess capacities along the value chain (upstream/midstream/downstream).
- It also 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 from non-participating non-OPEC oil-producing countries, some OPEC Member Countries and participating non-OPEC oil-producing countries.
