The Organization of Petroleum Exporting Countries (OPEC) and its allies have agreed to move forward with plans to increase oil output by 400,000 barrels per day (bpd) as early as February. The decision has been attributed to expectations of Omicron’s limited impact on the world economy as well as global oil demand.
With record production cuts of 10 million bpd imposed in 2020, OPEC has been focused on production recovery to pre-pandemic levels. Despite the approval of further increases, Reuters reports that “some member states continue to struggle with capacity constraints.
Saudi Arabia has been instrumental in boosting supply and meeting quotas in the last months, followed by Angola, the UAE, and Algeria, and yet underinvestment and limited exploration and drilling prospects, as well as political struggles, have dampened attempts to increase production in a number of OPEC and non-OPEC countries including Nigeria, Iran and Libya.
According to Bjornar Tonhaugen, Analyst at Rystad Energy, “Ongoing (oil production) outages in Libya, struggling production recovery in Nigeria, and reduced expectations for Russian production capacity add bullish weight to the scale from the supply side.”
Despite these uncertainties, demand continues to increase in the United States – which continues to urge the organization to increase production. With an OPEC meeting scheduled for February 2, 2022, discussions on market volatility, global economic recovery, and plans for the year ahead are expected.