In what may have been one of the shortest meetings in OPEC+ history, the oil cartel and its allies agreed to restore more halted production as the outlook for global oil markets improved, with demand largely withstanding the new coronavirus variant.
The 23-nation alliance led by Saudi Arabia and Russia approved another 400,000 barrel-a-day increase scheduled for February at a meeting on Tuesday, according to a statement published after today's meeting. The group is sticking to its plan to gradually restore output halted during the pandemic after its analysts predicted a smaller surplus this quarter than previously expected. The full statement is below:
24th OPEC and non-OPEC Ministerial Meeting No 02/2022
Following the formal conclusion of the 23rd OPEC and non-OPEC Ministerial Meeting (ONOMM) held via videoconference on Thursday December 2, 2021, and in view of current oil market fundamentals and the consensus on its outlook, the OPEC and participating non-OPEC oil-producing countries:
Reaffirm the decision of the 10th OPEC and non-OPEC Ministerial meeting on 12th April 2020 and further endorsed in subsequent meetings including the 19th OPEC and non-OPEC ministerial meeting on the 18th July 2021.
Reconfirm the production adjustment plan and the monthly production adjustment mechanism approved at the 19th OPEC and non-OPEC Ministerial Meeting and the decision to adjust upward the monthly overall production by 0.4 mb/d for the month of February 2022, as per the attached schedule.
Reiterate the critical importance of adhering to full conformity and to the compensation mechanism taking advantage of the extension of the compensation period until the end of June 2022. Compensation plans should be submitted in accordance with the statement of the 15th OPEC and non-OPEC Ministerial Meeting.
Decided to hold the 25th OPEC and non-OPEC Ministerial Meeting on 2 February 2022.
The decision was fully priced in, and the price of Brent rose to session highs, reversing all SPR-release losses as global fuel consumption continues to recover from 2020’s collapse as rising traffic and factory activity across key Asian consuming countries and dwindling crude inventories in the US boost oil prices..
AS Bloomberg notes, OPEC+ had already restarted about two-thirds of the production it halted in the early stages of the pandemic. The alliance is seeking to drip-feed the remainder at a pace that will satisfy the recovery in fuel consumption -- and stave off any inflationary price spike -- without sending the market into a new slump.
That said, there are questions about whether OPEC+ will can actually deliver the full monthly increment, given the recent struggles of some members such as Angola and Nigeria to hit their production targets. Just 130,000 barrels a day of additional OPEC+ crude are likely to hit the market in January, followed by 250,000 barrels a day in February, according to Amrita Sen, chief oil analyst and co-founder at Energy Aspects Ltd.
Meanwhile, while OPEC+ expects a supply glut to emerge this month, it appears to be smaller than previously thought. The increasing price premium of near-term Brent crude futures over later-dated contracts suggest the market remains tight. Production will exceed demand worldwide by 1.4 million barrels a day in the first three months of the year, the group’s Joint Technical Committee concluded on Monday, compared with 1.9 million in its previous assessment.
The cartel isn’t concerned about adding barrels at a time of surplus because fuel inventories are currently at low levels and typically replenish during the seasonal demand lull, according to a delegate. Stockpiles in developed nations were 85 million barrels below their average from 2015 to 2019 as of November, according to the JTC. At a separate and very brief online meeting on Monday, OPEC ministers appointed veteran Kuwaiti oil executive Haitham Al-Ghais as its new top diplomat, to assume the post in August after the term of its current Secretary-General Mohammad Barkindo expires.