The twenty-three members of the OPEC+ alliance decided on Wednesday to continue to open their floodgates slightly in March, despite the soaring prices of black gold, and geopolitical tensions which pose a threat to supply.
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Representatives of the thirteen members of the Organization of the Petroleum Exporting Countries (OPEC) and their ten allies via the OPEC+ agreement agreed “to adjust their total production level by 400,000 barrels per day for the month of March”, OPEC announced in a statement after a brief meeting, the outcome of which was widely anticipated.
This gradual strategy, renewed from month to month, was initiated in the spring of 2021 thanks to the recovery in demand, after drastic cuts to deal with the Covid-19 pandemic.
OPEC+ has never deviated from its line despite calls in the fall from the White House to further loosen the black gold tap in order to calm the surge in prices.
Since the last meeting of the organization, the price of a barrel of West Texas Intermediate (WTI) has climbed by more than 17% and that of Brent by more than 14%, the two crude benchmarks reaching in January new highs for more seven years old.
On Wednesday around 1:30 p.m. GMT, oil prices were on the rise, with WTI brushing the symbolic bar of 90 dollars and Brent moving above it.
Objectives not achieved
Even if the announced increase is once again modest, the market fears “that OPEC + will not be able” to reach its production objectives, commented Bjornar Tonhaugen, analyst at Rystad Energy.
“A number of countries, such as Angola and Nigeria, are simply not in a position to increase their production any further,” confirms Carsten Fritsch of Commerzbank, and the other states are unwilling to close the gap.
In December, total OPEC+ volume rose by only 90,000 barrels per day, well short of the target set at 400,000 barrels, according to a survey by the Bloomberg agency.
For Louise Dickson, of Rystad Energy, the alliance of 23 nevertheless holds the key to balancing “an oil market in need of supply” and stopping the overheating of prices.
“The only short-term solution will have to be led by Saudi Arabia, the producer with the largest spare capacity,” she said.
Geopolitical crises
The market is also boosted by strong geopolitical tensions which involve the behemoths of the production and export of black gold – Russia, Saudi Arabia and the United Arab Emirates.
And pose threats to supply.
The United Arab Emirates intercepted a ballistic missile launched by Houthi rebels in Yemen on Monday, the latest attack against the Gulf country which is part of a military coalition led by Riyadh.
But it is another escalation that occupies everyone’s mind: tensions are at their highest between Moscow and the West over Ukraine, near which Russia has massed tens of thousands of soldiers and heavy weapons.
“As long as the situation worsens, this crisis can only continue to push up” prices, estimates for AFP Neil Wilson, of Markets.com.