OPEC+ CONTINUES TO RAISE OIL OUTPUT: WHAT’S THE DEAL?

For the eighth consecutive month, the Organization of Petroleum Exporting Countries and its ally nations (OPEC+) plan to raise output by another 400,000 a month in February, continuing the agreement the group made as the world’s economy showed signs of recovery from the COVID War.
Last week, both benchmark Brent crude and West Texas Intermediate oil traded above $90 a barrel for the first time since 2014.
The price increase was due, in part, to some OPEC+ members failing to produce their share of the greater output, reducing supplies below expected levels.
The price rally also has been aided not only by rising global demand, but also by fears that political turmoil in the Middle East, North Africa, and Russia’s Ukraine crisis may disrupt supplies. 
“There are concerns in the market, partly priced in, that OPEC+ will not be able to produce what they say,” Bjornar Tonhaugen, head of oil markets at Rystad Energy, said to the Financial Times.
“We find that OPEC+ has failed to live up to its own pledge of increasing production according to plan,” he said.
By December’s end, the group’s production was 824,000 barrels a day below its stated target, the group’s own figures showed, according to the FT.
In that month, OPEC+ added only 250,000 barrels a day, not 400,000, because Angola, Malaysia, and Nigeria had not met their production targets and, for the first time, Russia did not meet its output goal.
“OPEC+ is not in any rush to raise production too quickly or to backfill for members struggling to meet their targets,” JP Morgan analyst Christyan Malek told the FT.
“They have a plan they want to stick to and don’t want to be seen as being pushed around,” he noted.
TREND FORECAST: Brent and West Texas Intermediate trading so close together in price is a clear sign that traders are expecting prices to stay high.  
U.S. oil production averaged a little more than 11 million barrels a day last year, compared to 12.29 million in 2019, according to the U.S. Energy Administration.
As we noted in our “Market Overview” sections on 20 July, 2021, the COVID-era economic shutdown drove thousands of small U.S. oil producers to shut in wells or leave the business entirely, often by way of bankruptcy court.
Now the global economy continues to stagger into a recovery, increasing demand for oil and gas as fuel as well as feedstocks for a range of industrial products.
Because of the recovery’s progress and OPEC+’s shortfalls, oil is likely to break through $100 in the very near future, especially as the summer driving season approaches and post-COVID consumers are eager to get back on the road.
Also, as we cited in our “Market Overview” of 25 January, 2022, ongoing political and military tensions in the Middle East, now coupled with Russia’s threat of a Ukraine invasion, will help keep oil prices from sliding.
If oil breaks through the $100 psychological barrier, not only will inflation spike higher, but also markets will abruptly fall while traders wait to see what the ramifications are.