OPEC’s main members will have to consider further production cuts as some of the group’s most troubled nations get unexpected supply growth, according to Citigroup Inc.
The “fragile five” of Iran, Iraq, Libya, Nigeria and Venezuela, which have struggled with output losses and disruptions in recent years, will add roughly 900,000 barrels per day to output this year and at least the same in 2024, the bank estimates. That is enough to meet the next growth in oil demand, he said.
“Suddenly they are sources of growth, and they will be sources of growth for five, four years, or maybe even longer in the case of Iraq and Venezuela,” said Ed Morse, head of commodities research at Citigroup , in an interview. . “It strikes us that the core OPEC+ countries have a problem on their hands.”
All five nations are showing positive signs of a recovery in supply, while oil demand growth will be constrained by the fading expansion in China, Morse said.
Iranian production has rebounded as it sends a large amount of exports to China while engaging in tentative diplomacy with the US. Iraq may restore supplies when it reaches an agreement on a closed pipeline to Turkey and also add capacity. Nigeria has beefed up security in its troubled oil-rich delta, Venezuela is in talks with Washington to ease sanctions, and even Libya, long wracked by instability, has potential for expansion.
As a result, OPEC leader Saudi Arabia and its Persian Gulf allies, which have cut output this year to bolster crude prices, may face pressure to cut output further, Morse said. The kingdom has already cut supply to a two-year low of nearly 9 million barrels a day.
“It’s going to be a big deal,” Morse said. “I think they’re going to have to cut, and I don’t know how easy it is for them to do that.”
