OPEC+ meets amid growing conflict and production issues

When OPEC+ nations meet on Wednesday, February 2 for the monthly cartel conference, the fact that two members may be on the brink of war and the failure to meet agreed production targets will be at the forefront of its agenda. of the day.

On Monday afternoon, West Texas Intermediate futures for March prices were at $87.95, a jump of $1.13 a barrel.

The cartel agreed in late summer 2021 to increase production by 400,000 barrels per day as the world emerges from the pandemic and resumes travel. Since then, OPEC+ countries have failed to meet this target. In December, the organization reported that it had added just 253,000 barrels per day, well below its target.

However, Andrew Lipow, president of Lipow Oil Associates, said the cartel’s continued failure to meet the production increase target will not end the deal at Wednesday’s meeting.

I expect them to stick to their already agreed-upon plan to restore production quotas of 400,000 barrels per day every month,” he told Capital.com.

OPEC underproduction

OPEC’s underproduction is fueling speculation about its ability to increase its workforce. In a note to clients, Morgan Stanley wrote: “Spare oil production capacity will drop from 6.5 million bpd currently to just 2 million barrels per day by mid-year.”

The day before, the International Energy Agency (IEA) predicted that OPEC’s spare capacity could drop by half to just 2.6 million bpd in the second half of 2022.

In practice, any significant increase in production goes to Saudi Arabia, Kuwait and the United Arab Emirates and, even if they don’t say so publicly, they benefit from higher incomes, Lipow said.

On Monday, the United Arab Emirates intercepted a Yemeni missile while Israeli President Isaac Herzog was visiting the country. Monday’s missile interception was the third in as many weeks.

The official WAM news agency reported that the attack caused no casualties.

Russian-Ukrainian tensions

Meanwhile, tension between Moscow and Kiev is at its highest in years, with a major Russian military buildup near their shared borders.

No diplomatic agreement is in sight, as the US and Russian delegations to the UN exchanged words at the UN on Monday. During the heated exchange, Russia accused the West of “stirring up tensions and rhetoric”, while the United States said Russia was avoiding answering questions related to troop build-ups.

Expect oil prices to rise if Russia invades Ukraine or Western nations impose sanctions on Moscow, experts said.

Sanctions against Iran

The cartel could also examine the impact of sanctions on Iran. Not much, experts say. Sales of Iranian crude and gas have doubled over the past year, the Islamic Republic News Agency, a state-run news agency, reported.

It is well known that China, the largest country in the world by population, continues to buy Iranian oil.

Meanwhile, the US Energy Information Administration on Monday released data showing the country released more barrels of strategic oil reserves. The data shows a drop of about 2 million barrels and gasoline supply has increased by about 1 million barrels.

Brent crude futures rose $1.18 to $91.21 on Monday.

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Felix J. Dixon