Top oil-producing countries led by Saudi Arabia and Russia announced another modest increase in output on Wednesday despite soaring crude prices and geopolitical tensions rattling the markets.
The 23-nation OPEC+ group said in a statement that it will increase production by 400,000 barrels per day in March, the same amount as in previous months.
The group, which includes the 13 members of the Saudi-led Organization of the Petroleum Exporting Countries (OPEC) and their 10 allies, including Russia, has resisted US pressure to further boost production to tame prices.
OPEC+ said in its statement following a ministerial videoconference that the decision was made “in view of current oil market fundamentals and the consensus on the outlook”.
The alliance’s prudent approach dates back to the spring of 2021 as demand recovered after drastic 2020 cuts in the face of the Covid-19 pandemic.
The announcement Wednesday “was hardly surprising, as the group has rigidly followed this approach since it was first agreed upon, even in December when oil prices plunged following the emergence of Omicron,” said Edward Gardner, commodities expert at Capital Economics.
“What matters going forward is whether OPEC+ can keep up with its planned production increases,” he said.
Oil prices hit seven-year highs in January, with the main international crude contract, Brent, topping $90. Prices are now hovering under $90.
Victoria Scholar, an expert at Interactive Investor, said she expected “further gains” due to solid demand and “drip-feed production increases” by OPEC+.
Struggling to meet quotas
OPEC+ is already struggling to meet its quotas with some members, such as Angola and Nigeria, unable to scale up their production and others, such as Saudi Arabia and the United Arab Emirates, unwilling to do so, said Carsten Fritsch of Commerzbank.
In December, the total volume of OPEC+ output increased by only 90,000 barrels per day, far short of the 400,000 target, according to a survey by the Bloomberg news agency.
Russia was complying with its commitments, Moscow’s energy minister, Alexander Novak, told Rossiya 24 television.
But there were “a number of uncertainties” weighing on demand while the coronavirus pandemic was still ongoing, he said.
The market has been further boosted by soaring geopolitical tensions plaguing stalwarts of oil production — Russia, Saudi Arabia and the United Arab Emirates.
The United Arab Emirates on Monday intercepted another ballistic missile launched by Yemen’s Houthi rebels, the latest attack on the Gulf country, which is part of a Saudi-led military coalition.
In Europe, tensions between Moscow and Western allies are at their highest point since the Cold War after Russia massed troops on its border with Ukraine.
“Ukraine-Russia (tensions) can only keep pushing it up as long as the situation keeps getting worse,” said Neil Wilson, analyst at Markets.com.