•Oil price exceeds $86
Emmanuel Addeh in Abuja
The Organisation of Petroleum Exporting Countries (OPEC) and its allies known as OPEC+ saw their overall compliance with the collective oil production cut at 115 per cent in September, down from the 116 per cent compliance in August.
Quoting a delegate, Argus reported that the production level was still higher than the market had hoped, with some members of the alliance failing to ramp up production in line with their quotas.
The high compliance rate despite the monthly easing of the cuts by 400,000bpd from the OPEC+ group suggested that not all members of the pact were capable of raising supply as quickly as their quotas under the deal stipulate.
A Bloomberg’s estimate indicated that if all members of the OPEC+ alliance stuck to their respective production ceilings in September, the overall production of the group would have been 747,000 barrels per day (bpd) higher than what it was.
OPEC+ was pumping 15 per cent less crude oil than its overall production quota for September, according to delegates familiar with the output numbers.
For several months now, some OPEC+ members—including OPEC’s Angola and Nigeria and non-OPEC’s Azerbaijan—have struggled to raise oil production to the highest possible level allowed under the deal.
The struggles came from technical issues, a lack of investments, and lower exploration efforts in recent years.
The 115 per cent estimated compliance of the OPEC+ producers in September was just a preliminary figure, which would be reviewed and amended if necessary by the Joint Ministerial Monitoring Committee (JMMC) in early November, before the monthly OPEC+ meeting of the ministers on November 4.
For November, the required crude oil production from OPEC and its non-OPEC allies led by Russia is 39.694 million bpd, after OPEC+ decided to stick to the plan to ease the collective cuts by 400,000 bpd next month.
If the OPEC+ group continues to under-produce compared to its overall quota, it could leave the oil market tighter than previously forecast.
Meanwhile, oil prices hit their highest level in years yesterday, as demand recovered from the COVID-19 pandemic, boosted by more power generators turning away from expensive gas and coal to fuel oil and diesel.
Brent crude oil futures rose 63 cents, or 0.7 per cent, to $85.49 a barrel by 0645 GMT, after hitting a session-high of $86.04, the highest price since October 2018.
The United States West Texas Intermediate (WTI) crude futures climbed 95 cents, or 1.2 per cent, to $83.23 a barrel, after hitting a session-high of $83.73, highest since October 2014. Both contracts rose by at least 3 per cent last week.
Easing restrictions around the world was likely to help the recovery in fuel consumption added to the gas-to-oil switching for power generation which could boost demand by as much as 450,000 barrels per day in the fourth quarter.
Cold temperature in the northern hemisphere were also expected to worsen an oil supply deficit as coal, electricity, and natural gas shortages lead to additional demand for crude.
Aside the United States, Japanese Prime Minister, Fumio Kishida, yesterday said that the country would urge oil producers to increase output and take steps to cushion the blow to industries hit by the recent spike in energy costs.
