OPEC+ is unlikely to go into peak production mode this year.
That’s according to Matthew Bey, a senior global analyst at risk intelligence firm RANE, who told Rigzone that the group already has a production deal for the year and that the top non-Russian leaders of OPEC+ – Saudi Arabia, the United Arab Emirates and Kuwait – all seem happy. supported by the market and oil prices with a contained oil production policy.
“For these countries to change their tune, there would have to be an exogenous shock that would force them to respond,” Bey said.
“If the West continues to increase sanctions on Russia and oil prices rise dramatically, the rest of OPEC+ could respond. However, for this to happen, we would need to see the West agree to put significant secondary sanctions on Russian oil to prevent China, India and Turkey from buying their oil, but Washington has so far resisted,” Bey added.
“One would assume that it would take a dramatic escalation in the conflict in Ukraine to get Washington to place secondary sanctions on Russian oil exports, as they would know it would dramatically increase politically sensitive gasoline prices in the US,” Bey continued.
According to Bey, “the other shock” that could cause OPEC+ to go into peak production mode “would be a supply shock that increases production forcing the Saudis to engage in a war for market share, similar to in the 2014-16 price war”.
“However, this would need to see a significant increase in US shale production, whose growth has slowed, and/or an easing of restrictions on Russian oil, which would require an end to war in Ukraine, which seems very unlikely in 2023,” Bey said.
OPEC+ production cuts
At the 33rd OPEC and Non-OPEC Ministerial Meeting, which took place in October 2022, OPEC+ decided to cut its global production by two million barrels per day from required production levels from August 2022, from November 2022. According to a production table published on the OPEC website after the meeting, the OPEC+ voluntary production figure from November 2022 to December 2023 is 41.856 million barrels per day. The group’s required production level in August 2022 was 43.856 million barrels per day, the table shows.
The last ministerial meeting of OPEC and non-OPEC members took place via video conference on 4 December 2022. At this meeting, OPEC+ decided to keep production stable. On February 1, the 47th Meeting of the Joint Ministerial Monitoring Committee (JMMC) took place via video conference. At that meeting, the JMMC reaffirmed its commitment to the Declaration of Cooperation, which extends until the end of 2023, as agreed at the 33rd OPEC Ministerial Meeting and non-OPEC members, noted a statement posted on the OPEC website earlier this month.
The next JMMC meeting is scheduled for April 3, while the next OPEC and non-OPEC ministerial meeting is scheduled for June 4.
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