Opec and allies agree further gradual increase in oil production
Opec and its allies on Wednesday agreed to boost the group’s production quota for the eighth consecutive month, even as data showed that some countries were struggling to keep up with the monthly increases in output.
The Opec+ group, which has included Russia since 2016, said it would aim to raise production by another 400,000 barrels a day in March, continuing with the monthly plan agreed in July to gradually replace output cut at the start of the pandemic.
Large oil consumers including the US, India and Japan have regularly called on Opec+ to increase production at a more rapid rate, fearful that energy cost inflation could derail their economic recovery. But Saudi Arabia and other large members of the group have consistently stuck with the plan to increase output more slowly.
The gradual rises in production have helped oil rally strongly in 2022, surpassing a seven-year high in January to trade at more than $90 a barrel for the first time since 2014.
The rally has been supported by resurgent demand and concerns that potential instability in Europe, the Middle East and north Africa might disrupt future supply.
But the failure of some Opec+ members to keep pace with the monthly increases has, analysts said, pushed prices even higher.
“There are concerns in the market, partly priced in, that Opec+ will not be able to produce what they say in the future,” said Bjornar Tonhaugen, head of oil markets at consultancy Rystad Energy. “Looking back, we find that Opec+ has failed to live up to its own pledge of increasing production according to plan.”
In December, Opec+ managed to increase output by only 250,000 b/d, according to the International Energy Agency, after Nigeria, Angola and Malaysia all underproduced. Russia also pumped less than its quota for the first time since the 2020 cuts were introduced.