OPEC adjusts production upwardly for September, this year

By Favour Ajibade

Nigeria's crude oil production level for September and October this year are 1,830million barrels per day and 1,826 million barrels per day respectively, says, the Organisation of Petroleum Exporting Countries (OPEC).

This was revealed at the meeting held yesterday by OPEC, At the meeting, the production level for August and October for OPEC and Non- OPEC participating countries remains unchanged.

The cartel, however, stated that its upward adjustment of 0.1 million barrel per day (mb/d) to the overall oil production level is only intended for September 2022.

In its report at the 32nd OPEC and non-OPEC Ministerial Meeting held via video conference yesterday ( Monday), the organisation approved upward adjustment of overall production for August 2022 by 0.648 mb/d.

The meeting decried adverse impact of volatility and the decline in liquidity on the current oil market and the need to support the market’s stability and its efficient functioning.

It said that higher volatility and increased uncertainties required the continuous assessment of market conditions and a readiness to make immediate adjustments to production in different forms, if needed.

It also added that OPEC+ had the commitment, the flexibility, and the means within the existing mechanisms of the Declaration of Cooperation to deal with these challenges and provide guidance to the market.

It reiterated the critical importance of adhering to full conformity and to the compensation mechanism.

“Compensation plans should be submitted in accordance with the statement of the 15th OPEC and non-OPEC Ministerial Meeting while 33rd OPEC and non-OPEC Ministerial Meeting holds on Oct. 5

Meanwhile, the OPEC+ oil cartel agreed Monday to cut production for the first time in more than a year as it seeks to lift prices that have tumbled due to recession fears.

The move could irk the United States as it has pressed the group to increase output in order to bring down energy prices that have fuelled decades-high inflation.

OPEC+, a 23-nation coalition led by Saudi Arabia and Russia, had agreed to huge cuts in output in 2020 when the Covid pandemic sent oil prices crashing, but it began to increase production modestly again last year as the market improved.

Oil prices soared to almost $140 a barrel in March after Russia invaded Ukraine.

But they have since receded below $100 per barrel amid recession fears, Covid lockdowns in major consumer China and Iran nuclear talks that could bring Iranian crude back into the market.

While analysts had expected another modest increase at Monday’s ministerial meeting, OPEC+ said in a statement that it decided to reduce output by 100,000 barrels per day in October, returning to the production level of August.

The group also left the door open to holding talks prior to its next scheduled meeting on October 5 “to address market developments, if necessary”.

“First and foremost it is a clear message from the group: OPEC+ will not allow the oil price to slide. Further cuts will be initiated if necessary,” Bjarne Schieldrop, chief commodities analyst at SEB research group, told AFP.

While analysts said the cut was mostly symbolic, oil prices rose by more than three percent following the announcement, with the international benchmark, Brent, exceeding $96 per barrel while the US contract, WTI, reached almost $90.

At its last meeting, OPEC+ agreed to a small rise of 100,000 barrels per day for September after US President Joe Biden travelled to Saudi Arabia to plead for a production bump — although it was six times lower than its previous decisions.

Energy Minister Abdulaziz bin Salman last month had appeared to open the door to the idea of cutting output, which has since received the support of several member states and the cartel’s joint technical committee.

He said “volatility and thin liquidity send erroneous signals to markets at times when clarity is most needed”.

Craig Erlam, analyst at OANDA trading platform, said the cut was “also a blow to President Biden as the hike last month was viewed as a token gesture after his visit.”

“Now it’s clear how valuable that actually was, or wasn’t as it turns out. The political damage it caused was a waste and if anything, it looks worse than if nothing had changed in the first place,” Erlam said.

Iran talks

Caroline Bain, commodities expert at Capital Economics, said the cut was not a total surprise and “little more than symbolic” as OPEC+ has struggled to meet its quotas due to lacklustre production in some of its member countries.

“The bigger picture is that OPEC+ is producing well below its output target and this looks unlikely to change given that Angola and Nigeria, in particular, appear unable to return to pre-pandemic levels of production,” Bain said.

In efforts to curb rising oil prices, the United States and its allies have released crude from their emergency reserves.

And in a bid to curb Russia’s war funding, the G7 group of industrialised powers agreed Friday to move “urgently” towards capping the price of Russian oil.

Moscow has warned that it will no longer sell oil to countries that adopt the unprecedented mechanism.

Another geopolitical issue is clouding the outlook.

Negotiations aimed at reviving a landmark nuclear deal between Tehran and world powers could lead to an easing of oil sanctions in return for curbs to the atomic activities.

However, Washington said Thursday that Tehran’s latest response to a European Union draft was “unfortunately… not constructive”.