The international oil market has expressed concern that the Organisation of Petroleum Exporting Countries and its Declaration of Cooperation partners may not meet up with supplies, as Nigeria and Angola fall short of production.
A report by Reuters on Wednesday said OPEC’s oil output was one million lesser than expected, blaming Nigeria and Angola for the shortfall.
“OPEC is pumping almost 1 million bpd less than its current output target, according to its own figures and other estimates, with notable shortfalls in Nigeria and Angola from which Western oil companies have moved away in recent years,” the report stated.
Nigeria had been unable to meet up with its 1.83 million per day OPEC quota in the last one year as a result of oil theft in the Niger Delta.
However, the country’s output, which sank to a record low of 900, 000 barrels per day last November, rise to 1.3mb/d February, hitting 1.6m/d in March.
Although the country is 200, 000 barrels per day short of its OPEC+ quota, an output of 1.6mb/d last month pushed it to its production target of 1.6mb/d for the first quarter of 2023.
The increased production had shoved the country’s crude oil revenue by N337b in March, hitting a total of N1.8tn, The PUNCH estimation had shown.
Oil output for January was 1.25mbp and 1.3mbp for February.
Although the country is yet to meet the production quota for OPEC+, its output increase had in turn contributed significantly to the 28.90mbpd produced by the group for the month of March.
While non-OPEC producers will still pump more in 2023, the forecast of a supply increase of 1.44 million barrels per day falls short of the expected world demand growth of 2.32 million barrels per day.
The International Energy Agency, which represents 31 countries including top consumers in the United States, also expects demand growth to exceed supply growth, although to a smaller extent than OPEC.
In OPEC’s view, investment cuts after oil prices collapsed in 2015-2016 due to oversupply, along with a growing focus by investors on economic, social and governance issues – such as tackling climate change – have led to a shortfall in the spending needed to meet demand.
OPEC Secretary General Haitham Al Ghais, in comments to Reuters last year, attributed slower shale growth to factors including an increase in investor caution and the impact of ESG issues on the industry.
OPEC+ surprise oil output cuts announced on Sunday are said to illustrate their greater power over the market, given limited supply growth by other producers such as U.S. shale firms and still-growing demand despite the energy transition.
Oil has jumped to $85 a barrel since the group announced production cuts of about 1.16mb/d, adding to curbs already in place.
Goldman Sachs said it sees “elevated OPEC pricing power – the ability to raise prices without significantly hurting its demand – as the key economic driver”, and estimates the production cut will raise OPEC+ revenues.
“One thing is for certain, OPEC is in control and driving price and U.S. Shale is no longer viewed as the marginal producer,” said James Mick, senior portfolio manager at Tortoise Capital Advisors.
“OPEC wants and needs a higher price, and they are back in the driver’s seat to obtain their wishes.”
OPEC+ does not have a target for oil prices.
The Saudi Arabian energy ministry said the voluntary output cut from the kingdom, the kingpin of OPEC+, was a precautionary measure aimed at supporting oil market stability.
