Top oil producers eye modest output boost

February 02, 2022: The 23 members of the OPEC+ oil cartel, who meet on Wednesday, are expected to stick to their guns and increase output modestly as the price of crude surges.

As in January, analysts expect the taps to be opened slightly, to the tune of an additional 400,000 barrels per day, Tamas Varga, an analyst at PVM Energy, told AFP.

Representatives of the 13 members of the Organization of the Petroleum Exporting Countries (OPEC), and their 10 allies through the OPEC+ agreement, will first meet at ministerial level before a broader video conference scheduled for 1300 GMT.

The cartel's prudent approach dates back to the spring of 2021 as demand recovered from drastic cuts in the face of the Covid-19 pandemic.

Since then, OPEC+ has not deviated from its line despite calls in the autumn from the White House to further boost supplies to tamp down prices.

Current prices of around $90 do not seem likely to change their position.

Since the last meeting of the organisation, the price of a barrel of West Texas Intermediate (WTI) has risen by more than 14 percent and Brent by more than 11 percent, with both crude references hitting highs in January not seen for more than seven years.

Victoria Scholar, an expert at Interactive Investor, said she expected "further gains", a product of solid demand and OPEC+'s "drip-feed production increases".

- Tensions on supply -

The market has been further boosted by soaring geopolitical tensions plaguing stalwarts of oil production -- Russia, Saudi Arabia and the United Arab Emirates.

The United Arab Emirates on Monday intercepted another ballistic missile launched by Yemen's Huthi rebels, the latest attack on the Gulf country, which is part of a Saudi-led military coalition.

In Europe, tensions between Moscow and Western allies are at their highest point since the Cold War after Russia massed troops on its border with Ukraine.

"Ukraine-Russia (tensions) can only keep pushing it up as long as the situation keeps getting worse," said Neil Wilson of Markets.com.

Separately OPEC+ is struggling to meet its quotas.

"OPEC+ has been failing for months to actually implement the agreed production hikes in full," noted Carsten Fritsch of Commerzbank.

In December, the total volume of OPEC+ output increased by only 90,000 barrels per day, far from the target of 400,000 barrels per day, according to a survey by Bloomberg.

Louise Dickson, an analyst at Rystad Energy, said the 23-nation alliance held the key to preventing prices from overheating.

"The only short-term solution for balancing the supply-short oil market will therefore need to come from OPEC+, and steered by Saudi Arabia," she said.

AFP/APP