By Adedapo Adesanya
The Organisation of the Petroleum Exporting Countries (OPEC) and its allies, OPEC+, may retain the current agreement made earlier to increase the production target for June by a small margin.
This was disclosed by delegates from the group as expectations that sanctions will fold Russian output and further counter demand growth concerns from Chinese lockdowns.
OPEC+ ministers are set to meet on Thursday (today) and are expected to agree to raise production targets by 432,000 barrels per day for next month.
Under a deal reached in July 2021, the group will increase output targets by 432,000 barrels per day every month until the end of September, to unwind its remaining production cuts.
In late March, it agreed to go ahead with the planned output increase for May.
The OPEC+ meeting today comes against the backdrop of a major announcement from the European Union (EU) yesterday which proposed a phased oil embargo on Russia in its toughest measures yet to punish Vladimir Putin’s aggression in Ukraine.
OPEC Secretary-General, Mr Mohammad Barkindo, at the meeting of the OPEC+ Joint Technical Committee, which often takes place a day before the official meeting, said it was not possible for other producers to replace Russian supply.
“What is clear is that Russia’s oil and other liquids exports of more than 7 million barrels per day cannot be made up from elsewhere.
“The spare capacity just does not exist.
“However, its potential loss, through either sanctions or voluntary actions, is clearly rippling through energy markets,” he said.
Business Post reported that oil prices jumped by more than 4 per cent on the EU announcement, with Brent crude rising to $110 per barrel.
OPEC+ expects supply to exceed demand by 1.9 million barrels per day in 2022, 600,000 barrels per day higher than a previous forecast.
OPEC now expects 2022 world oil demand to expand by 3.67 million barrels per day in 2022, down 480,000 barrels per day from its previous forecast.
Mr Barkindo said the Chinese lockdowns were curbing the use of transport fuels and petrochemical feedstock.
“This has affected oil demand, with some suggesting that the country is facing the biggest oil demand shock since early 2020,” he told the JTC.
OPEC+ expects oil production from non-OPEC countries in the alliance to average 18.2 million barrels per day, the data showed a 600,000 barrels per day downward revision from the previous forecast, partly reflecting lower Russian supplies.
Russia’s own forecasts showed output may fall by as much as 17 per cent in 2022, an economy ministry document seen by Reuters showed.
According to the document, Russian oil output may decline to between 433.8 million and 475.3 million tonnes – equivalent to between 8.68 million and 9.5 million barrels per day – in 2022, from 524 million tonnes in 2021.
Modupe Gbadeyanka