OPEC+ Leaves Oil Supply Plan Unchanged, Boosts June Production by 432,000bpd

The Organisation of Petroleum Exporting Countries (OPEC) and its allies known as OPEC+ on Thursday agreed to stick to last year’s plan to gradually release just over 400, 000 barrels per day of oil into the market, leaving the deal unchanged.

As predicted earlier, the oil producers’ group, like in the previous months, said it was boosting crude oil production next month by 432,000 bpd during a meeting attended by members of the organisation.

The meeting also saw the international oil cartel increase Nigeria’s production allocation for June to 1.772 million bpd, even though the country had been underperforming for over a year and was barely able to drill 1.4 million bpd.

The country’s inability to raise its production therefore means that it’s not able to benefit from high oil prices, which temporarily exceeded $110 on Thursday.
An OPEC production schedule allocating next month’s oil production ration showed Nigeria’s share of global crude drilling will rise by 19,000 bpd for the month, with OPEC hiking it from 1.753 million bpd in May to 1.772 million bpd in June.

Aside Nigeria, which received the highest share among African oil-producing nations, Angola was allocated 1.480 million bpd, coming second on the African continent, while Algeria will produce 1.03 million bpd and Congo 315, 000 bpd.

In other climes, Saudi Arabia and Russia, OPEC+ biggest producers got approval to drill 10.663 million bpd each next month, meaning that while the OPEC 10, excluding Libya, Venezuela and Iran, which are exempted, are to produce 25.864 million bpd, non-OPEC members will drill 16.694 million bpd, to hit 42.558 million bpd for the month. The decision was taken after a very short virtual meeting, the third since one of the key members of the alliance, Russia, invaded Ukraine.

Although OPEC has been under severe pressure from the United States and its allies to ramp up production as energy prices continue to skyrocket, however, this month’s decision could be justified due to slowing oil demand in China and a chance that crude losses from Russian supply could pile up.

A short statement after the meeting, stated that following the conclusion of the 28th OPEC and non-OPEC ministerial meeting, it was noted that continuing oil market fundamentals and the consensus on the outlook pointed to a balanced market.

It further noted the continuing effects of geopolitical factors and issues related to the ongoing Covid-19 pandemic.

The participating countries therefore agreed to: “Reconfirm the production adjustment plan and the monthly production adjustment mechanism approved at the 19th OPEC and non-OPEC ministerial meeting and the decision to adjust upward the monthly overall production by 0.432 mb/d for the month of June 2022.”

The group also resolved to: “Reiterate the critical importance of adhering to full conformity and to the compensation mechanism, taking advantage of the extension of the compensation period until the end of June 2022.”

Furthermore, it noted that compensation plans should be submitted in accordance with the statement of previous ministerial meetings, and therefore fixed its next conference for June, 2, 2022 to decide July’s production volume.

Meanwhile, Shell yesterday reported soaring first-quarter net profit as surging oil prices offset a sizeable charge which was earlier linked to its Russia exit.
Profit after tax leapt 26 per cent to $7.1 billion (6.7 billion euros) from a year earlier, Shell said in a statement, while underlying earnings spiked almost three-fold to a quarterly record of $9.1 billion.

But while other oil companies and countries producing the commodity are cashing out, Nigeria continues on a borrowing spree, since it’s executive body in the country’s hydrocarbons space, the Nigerian National Petroleum Company (NNPC) keeps paying petrol subsidies and is unable to increase production as a result of ageing infrastructure, oil theft and general inefficiency.
In addition, Shell noted that revenues rallied 51 per cent to $84.2 billion in the first three months of the year.

“The war in Ukraine is first and foremost a human tragedy, but it has also caused significant disruption to global energy markets and has shown that secure, reliable and affordable energy simply cannot be taken for granted,” noted Shell’s Chief Executive, Ben van Beurden.

The London-listed group last month announced that it would take a hit of between $4 billion and $5 billion in the first quarter as a result of impairment from assets and additional charges relating to its exit from its Russian operations.

Shell announced in late February that it would sell its stakes in all joint ventures with Russian state energy giant Gazprom after the Kremlin launched its assault on Ukraine.
It then decided in March to withdraw from Russian gas and oil in line with UK government policy, but has meanwhile begun the second tranche of its $8.5 billion share buyback.

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