By Adedapo Adesanya
The Organisation of the Petroleum Exporting Countries and its allies (OPEC+) will likely stick to plans for a modest increase in oil output in May despite a surge in prices due to the Ukraine crisis and calls from the United States and other consumers for more supply.
OPEC+ has boosted output targets by 400,000 barrels per day each month since August 2021 and from May 1, that monthly target increase will rise slightly to 432,000 barrels per day.
The increase in the output quota is not a concession to consuming countries asking for more oil but comes after internal recalculations of reference production levels, effectively higher baselines for Saudi Arabia, Russia, Iraq, the United Arab Emirates (UAE) and Kuwait.
Prices had reached $139 per barrel earlier in March and this had led many consuming countries including the United States to call producers to raise their output but top OPEC members such as Saudi Arabia and the United Arab Emirates have held back on increasing their production targets.
Also, the group has remained on the fence regarding the actions of Russia, one of the members of the alliance when it invaded its neighbours, Ukraine on February 24.
The baseline changes taking effect in May were agreed upon in July 2021 and adds a total of 1.632 million barrels per day to the reference production – the level from which output is adjusted – of Saudi Arabia, Russia, the UAE, Iraq, and Kuwait.
In an August 2021 article in OPEC’s magazine, OPEC Bulletin, Saudi Energy Minister Prince Abdulaziz bin Salman was quoted as saying the monthly output hikes would increase to 432,000 barrels per day to reflect the revised baseline levels.
Despite the current output level, countries are finding it difficult to meet their targets as they struggle with capacity constraints.
It was also pointed out by market analysts that the alliance would most likely stick to the plan for May, as Saudi Arabia is reluctant to agree to a bigger hike as its aim to not endanger cooperation on oil policy with Russia, which is facing sanctions from some Western countries.
Modupe Gbadeyanka