By Adedapo Adesanya
The Organisation of the Petroleum Exporting Countries and allies (OPEC+) is now producing below its targets by a record 3.58 million barrels per day – about 3.5 per cent of global demand, highlighting underlying tight supply in the oil market.
Data showed that shortfall in August, which stood at more than OPEC’s number 3 producer, the output of the United Arab Emirates (UAE), was a record and 24 per cent higher than July’s 2.89 million barrels per day.
The 10 OPEC members bound by the pact saw their collective crude oil production hit 1.399 million barrels per day below the quota, while the non-OPEC producers in the deal were more than 2 million barrels per day behind quota, at 2.185 million barrels per day. In July, OPEC+ was already 2.9 million barrels per day below its target.
Two main factors have been derailing OPEC+’s ability to hit its production targets: a chronic problem with underinvestment among certain members such as Nigeria and Angola, and, more recently, the impact of Western sanctions on Russian output.
Underinvestment in the Nigerian oil industry and the perennial problem of oil theft from pipelines have plagued the sector in recent years. Oil majors are not investing in Nigerian supply, and many foreign firms have either sold assets or signalled pursuing divestments in Nigeria’s oil industry.
Things worsened when production plunged to 972,000 barrels per day in August 2022, the lowest ever in 32 years.
This is as Angola and Libya overtook Nigeria by producing higher volumes of crude during the review month.
OPEC+ was widely expected to continue to underperform by a lot compared to its production targets for July and August after the group decided to accelerate the rollback of the cuts and have them completely unwound by the end of August.
The underperformance in September will be even higher because the group lifted its collective target by 100,000 barrels per day for the month of September. This increase will be reversed in October, OPEC+ decided at a meeting earlier this month.
