OPEC+ alliance confirms 137,000 barrel per day output hike from December, maintaining level for three months amid market share strategy
LONDON: The eight key members of the OPEC+ alliance, including Saudi Arabia and Russia, have agreed a further slight increase to their oil production.
This 137,000-barrels-per-day hike will apply from December and remain unchanged for the following three months, marking a pause in regular increases since April.
The group described this decision in a statement following their virtual meeting on Sunday.
Analysts had anticipated this announced increase, viewing it as a bid by the Voluntary Eight members to gain greater market share.
Since April, the V8 group comprising Saudi Arabia, Russia, Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria and Oman has boosted production by approximately 2.7 million barrels per day total.
OPEC+ has accelerated output increases at a surprising pace following extended production cuts designed to combat price erosion.
Growing competition, particularly from United States shale oil producers, has made market share expansion the group’s primary priority.
SEB bank commodities analyst Ole Hvalbye stated the group’s strategic shift is working to some degree just before Sunday’s production announcement.
He told AFP that United States shale producer supply is no longer increasing but moving sideways with reduced investment in new production.
The V8 group justified their latest increase by citing low oil inventories as in previous months.
United States Energy Information Administration data shows recent sharp drops in crude oil inventories, supporting Brent crude prices around $65 per barrel.
Analysts note that adding barrels to the market risks price declines that could reduce profits for the V8 group.
Standard Chartered energy analyst Emily Ashford said the 137,000-barrel quota increase would actually result in lower production, limiting price impact.
She told AFP that some V8 members must compensate for past overproduction while Russia operates at full capacity.
United States sanctions imposed in late October targeted Russia’s two largest oil producers, Rosneft and Lukoil, increasing pressure on Russian supplies.
Analysts remain uncertain about the sanctions’ real impact, depending on Washington’s enforcement against foreign financial institutions involved with these companies.
TotalEnergies CEO Patrick Pouyanne suggested markets underestimate the significance of sanctions against core Russian oil trading companies.
He stated on Thursday that significant Russian supply reduction would support oil prices.
Many analysts remain cautious, noting Russia’s success at circumventing Western sanctions previously.
The United States may not act against Chinese purchases as the main importer of Russian oil following recent trade tension reduction agreements. – AFP
