Despite Growing Pressure, OPEC Sticks with 400,000bpd in March

•Nigeria gets Additional 527,000 barrels

Emmanuel Addeh in Abuja

Despite the tightening oil market, the Organisation of Petroleum Exporting Countries (OPEC) and its allies, OPEC+, yesterday agreed to a measured 400,000 barrels per day increase in production output for March.

The international producers’ group also allocated an additional 527,000 barrels of oil to Nigeria for the entire 31 days in the month, broken into 17,000 barrel per day. For months, Nigeria has been unable to meet its required share of the OPEC quota, being 1.683 million bpd in December, 1.701 million bpd in February and now 1.718 in March.

Poor upstream infrastructure, sabotage, oil theft as well as lack of investment have been blamed for the ongoing default.

However, in spite of the increasing demand pressure, OPEC countries and their allies agreed to continue feeding a modest amount of additional oil into the market.

Oil prices are currently hovering at seven-year highs of $90 a barrel, prompting expectations from high consuming nations on OPEC to wet the market and bring down rising prices.

But the oil ministers at the 25th OPEC and non-OPEC Ministerial Meeting (ONOMM) decided to stick with a plan set in July 2021, to increase production next month by the relatively modest figure, even though it had fallen short of its targets in recent months.

If conflict over Ukraine escalates this month, it could threaten a disruption to energy flows and send shudders through the markets and even tighten supply the more.

It would be the eight month the group would decide to adhere to its production quota even as some countries have been struggling to keep up with the monthly increases in output in a plan agreed last year to gradually replace output cut at the start of the pandemic.

Large oil consumers including the US, India and Japan have regularly called on OPEC+ to increase production at a more rapid rate, fearful that energy cost inflation could derail their economic recovery. But Nigeria, Saudi Arabia and other large members of the group have consistently stuck with the plan to increase output more slowly despite the pressure.

However, the gradual rise in production has helped oil rally strongly in 2022, surpassing a seven-year high in January to trade at more than $90 a barrel for the first time since 2014.

It’s still uncertain, however if the international cartel will even be able to pump the 400,000 bpd extra oil, as it in December, only managed to increase output by about 250,000 bpd, according to data from the International Energy Agency (IEA).

Aside Nigeria, Angola and Malaysia have all under-produced while Russia also pumped less than its quota for the first time since the 2020 cuts were introduced.

As at yesterday’s afternoon, Brent crude, the international benchmark, was up 1.1 per cent at $90.16 a barrel, while United States crude was 1.2 per cent higher at $89.28.

A statement released after the meeting, regarded as one of the shortest in the history of the Sanusi Barkindo-led organisation, stated: “Following the conclusion of the 25th OPEC and non-OPEC Ministerial Meeting (ONOMM), held via videoconference on Wednesday, 2 February 2022, and in view of current oil market fundamentals and the consensus on the outlook, the OPEC and participating non-OPEC oil-producing countries in the Declaration of Cooperation (DoC) decided the following.

“To reaffirm the decision of the 10th OPEC and non-OPEC ministerial meeting on 12 April 2020 and further endorsed in subsequent meetings, including the 19th ONOMM on 18 July 2021.

“To reconfirm the production adjustment plan and the monthly production adjustment mechanism approved at the 19th ONOMM and the decision to adjust upward the monthly overall production by 0.4 mb/d for the month of March 2022.

“To 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.”

The cartel further stated that compensation plans should be submitted in accordance with the statement of the 15th meeting of the ministers and fixed the 26th meeting of the organisation for March 2, 2022.

Earlier in the week, Goldman Sachs had expressed the view that OPEC+ might decide to announce a larger production increase for March than the usual 400,000 bpd, considering the oil price rally to $90 and the potential for renewed discontent from major oil importers at the high price levels.

OPEC+, however, confirmed the 400,000 bpd increase in record time, lasting about 16 minutes and declined to hold a press conference after the meeting as has been its tradition.