If OPEC+ were to go into peak production mode, it would likely result in Saudi Arabia and Russia once again fighting for market share and a race to set the price of oil as low as possible.
That’s what Matthew Bey, senior analyst at RANE, told Rigzone, adding that “this could bring oil prices back below $50 a barrel, if not lower, as only Saudi Arabia would add at least one million barrels per day in oil production.”
However, OPEC+ is “unlikely” to go into maximum oil production mode next year, according to Bey, “as Russia has little interest in driving down oil prices while the war in Ukraine continues , as the Kremlin sees high energy prices as potentially undermining political support for the ongoing conflict in Ukraine and, in the case of the US, an issue that will hurt President Biden’s re-election campaign.”
“Saudi Arabia also appears to be making it clear that it wants to support oil prices at least around $80 a barrel, making it unlikely that they will reverse course and go into peak oil production mode.” , Bey added.
Bey told Rigzone that “a more likely path” to the Saudis and OPEC+ going into peak oil production mode “is if there is an energy shortage caused by some kind of conflict or accident that sends oil prices well above $100 a barrel.”
In its latest oil market report, published earlier this month, the International Energy Agency (IEA) pegged total OPEC+ crude oil production, excluding condensates, at 43.69 million barrels per day in June and 42.46 million barrels per day in July.
OPEC+’s sustainable crude oil production capacity, which the report describes as capacity levels that can be reached within 90 days and maintained for an extended period, is 49.41 million bpd, according to the report. barrels per day
In the report, it was shown that Saudi Arabia produced 9.98 million barrels of crude oil per day in June and 9.06 million barrels per day in July, while Russia produced 9.45 million barrels per day in June and 9.4 million barrels per day. in July. Saudi Arabia had the highest crude production level among OPEC+ members in June and Russia had the highest in July, the report said.
Saudi Arabia has the highest sustainable capacity in the OPEC+ group at 12.25 million barrels per day, while Russia has the second highest at 9.98 million barrels per day, the report said.
“Market balances will tighten further in the autumn as Saudi Arabia and Russia extend supply cuts at least until September,” the IEA report noted.
“A large OPEC+ spare capacity cushion of 5.7 million barrels per day means there is significant scope for the alliance to increase output later this year,” he added.
“Additional supplies of heavy sour crude would allow refiners to ramp up activity and help ease product market tensions. But if the bloc’s current targets are maintained, oil stocks could draw 2.2 million barrels to the per day in 3Q23 and 1.2 million barrels per day in the fourth quarter, with the risk of higher prices,” the report continued.
In a statement published on its website earlier this month, OPEC noted that the Joint Ministerial Monitoring Committee (JMMC) reviewed crude oil production data for the months of May and June 2023 “and noted the general compliance of OPEC and non-OPEC participating countries” the Declaration of Cooperation (DoC)”.
“The committee will continue to closely assess market conditions taking into account the willingness of DoC countries to address market developments and be ready to take additional measures at any time, building on the strong cohesion of OPEC and non-OPEC oil-producing countries.” adds the statement.
“The committee also expressed its full appreciation and support for the Kingdom of Saudi Arabia’s efforts to support oil market stability and reiterated its appreciation for the Kingdom’s additional voluntary cut of one million barrels per day and to extend it for the month of September,” he continued.
“The committee also recognized the Russian Federation for its voluntary additional reduction in exports by 300,000 barrels per day during the month of September,” it added.
The next meeting of the JMMC is scheduled for October 4, according to the statement.
OPEC notes on its site that the DoC “constitutes an unprecedented milestone in the history of the Organization of the Petroleum Exporting Countries.”
“For the first time, OPEC member countries coordinated with 11 non-OPEC oil producing countries (now 10 – Equatorial Guinea became an OPEC member in May 2017) in a concerted effort to accelerate the stabilization of the global oil market,” he adds. .
To contact the author, please send an email andreas.exarcheas@rigzone.com
