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At its monthly meeting on 3 March, the Organization of Petroleum Exporting Countries and its allies (OPEC+), chiefly Russia, declined to raise production beyond established targets despite prices approaching $120 a barrel and a looming global supply crunch.
Instead, the group agreed to continue the monthly production boost of 400,000 barrels a day for April.
That increment will have no effect on the current price surge, analysts told The New York Times, especially since several OPEC members already have been unable to deliver their share of past monthly increases, as we reported in “OPEC+ Continues to Raise Oil Output: What’s the Deal” (8 Feb 2022).
However, fundamental conditions and the future outlook indicate “a well-balanced market,” the group’s post-meeting statement said. It blamed current price “volatility” on “geopolitical developments” but did not name Russia’s attack on Ukraine.
“Such an argument will increasingly strain credulity,” analyst Helima Croft at RBC Capital Markets, said in a note to clients quoted by the NYT.
Several U.S. producers, including Continental Resources, Devon Energy, and Pioneer Natural Resources, have said they will continue to limit their oil production to avoid an oil glut and to keep prices profitable.
Occidental Petroleum, the ninth-largest U.S. oil company last year by revenue, finds “no need and no intent to invest in production growth,” CEO Vicki Hollub told analysts in a 4 March call quoted by the NYT.
A 60-million-barrel release from nations’ strategic reserves earlier this month failed to slow climbing prices, according to the International Energy Agency.
“We do not view this as sufficient relief,” Goldman Sachs analysts wrote in a 1 March note to clients.
Reducing demand for oil “is now likely the only sufficient rebalancing mechanism” to bring prices down, they said.
Alexander Novak, Russia’s deputy prime minister, is currently co-chair of OPEC+.
TRENDPOST: During the COVID War era that began in 2020 oil prices collapsed, which we reported in articles including “Shale Leader Chesapeake Energy Files for Bankruptcy” (30 Jun 2020) and “Oil Companies Merging Amid Industry Turmoil” (27 Oct 2020). Many U.S. producers went bankrupt; large producers pumped only red ink for months and now seek to replenish their finances.
Last year at this time, Brent Crude was selling at $63 per barrel and – as we noted in this Trends Journal—Brent Crude closed at around $130 per barrel. As the old saying goes, “It’s the economy, stupid,” and OPEC+ wants to make as much money as they can per barrel of oil. With reserves dwindling in their “it’s the economy, stupid” world, selling less and making more is the bottom line.