The Organisation of Petroleum Exporting Countries (OPEC) again resolved on Thursday to stick to its strategy of gradually reopening its oil taps, agreeing to raise output targets by a measured 432,000 barrels per day for May.
The oil producers’ group and its allies, known as OPEC+ at the conclusion of the 27th OPEC and non-OPEC Ministerial Meeting decided not to deviate from their schedule of gradual increases, as it has done for months.
Although oil prices recently overshot the $100 mark, OPEC insisted that some of the drivers of the increase like the Russia-Ukraine war were extraneous to the cartel’s activities and have little to do with the supply of the commodity.
Russia is the world’s third-largest oil producer, behind the US and Saudi Arabia, and the world’s largest exporter of crude to global markets in addition to being a major producer and exporter of natural gas.
Brent crude, Nigeria’s international benchmark, was down 5.6 per cent at $107.05 yesterday.
The oil cartel also raised Nigeria’s production quota from April’s 1.735 million barrels per day to 1.753 million barrels per day in May, even though the country has been struggling to meet lower production allocations.
Nigeria had been constrained in meeting its OPEC quota for months, and as at the last production circle had as much as 300,000 barrels per day deficit, mainly due to theft, ageing upstream infrastructure and sabotage as well as technical reasons.
Despite the over 1.7 million barrels per day output allowed by the oil producers organisation, the country had managed to increase production to about 1.4 million, the highest in recent times, going by the latest OPEC review.
After its meeting yesterday, OPEC noted that continuing oil market fundamentals and the consensus on the outlook pointed to a well-balanced market, and that current volatility is not caused by fundamentals, but by ongoing geopolitical developments.
The OPEC and participating non-OPEC oil-producing countries decided to reaffirm the decision of its ministerial meeting on 12th April 2020 and further endorsed in subsequent meetings to reconfirm the baseline adjustment, the production adjustment plan and the monthly production adjustment mechanism approved by the organisation.
The Sanusi Barkindo-led group also resolved to stick with its “decision to adjust upward the monthly overall production by 0.432 mb/d for the month of May 2022.”
“OPEC reiterates 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.
“Compensation plans should be submitted in accordance with the statement of the 15th OPEC and non-OPEC ministerial meeting,” it stated. The body further scheduled its next meeting to hold on May 5, 2022.
Meanwhile, President Joe Biden is considering a plan to release one million barrels of oil a day from the Strategic Petroleum Reserve (SPR) for as long as 180 days, a move that would add a large amount of oil to the global market.
If fully enacted, the president’s plan is intended to help the US weather spikes in demand or drops in supply. About 550 million barrels are in the reserve, which has a reported total capacity of about 714 million barrels.
CNN described the announcement as unprecedented, saying the step was meant to punish oil companies for not increasing production from unused leases on federal land.
The steps are an attempt to reduce gas prices while also putting an onus on oil companies to increase supply. The dramatic step, which Biden was set to announce from the White House later Thursday, confronts what has become a looming political problem months ahead of the midterm elections.
Emmanuel Addeh in Abuja
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