LONDON: OPEC’s increased oil output in March fell short of its target under a deal with allies, a Reuters survey found, as outages in some African members partly offset increases by Saudi Arabia and other top producers.
The Organization of the Petroleum Exporting Countries (OPEC) pumped 28.54 million barrels per day (bpd) in March, the survey found, up 90,000 bpd from February but short of the 253,000 bpd increase called for under its deal with allies including Russia.
OPEC and its allies, known as OPEC+, are gradually relaxing 2020 output cuts as demand recovers from the pandemic. OPEC+ met on Thursday and confirmed previously agreed plans, despite the surge in oil prices to a 2008 high above $139 a barrel following Russia’s war of Ukraine.
The deal calls for a 400,000 bpd increase in March from all OPEC+ members, of which about 253,000 bpd is shared by the 10 OPEC producers the agreement covers.
Output undershot the pledged increases from October to January, but exceeded it in February, Reuters surveys showed, as many producers lack the capacity to pump more crude due to insufficient investment, a trend accelerated by the pandemic.
As a result, the 10 OPEC members are pumping far less than called for under the deal. OPEC compliance with pledged cuts was 151 per cent, the survey found, versus 136 per cent in February.
Nigerian output posted a 100,000 bpd decline, the survey found, after incidents prompted force majeure to be declared on the Bonny and Brass River streams. Force majeure was lifted on Brass River.
Libyan output declined by 50,000 bpd due to shutdowns at two oilfields early in the month.
These outages limited the increase in OPEC’s output by top producers. The biggest rise in March of 110,000 bpd came from Saudi Arabia, the survey found.
Kuwait and Iraq each provided smaller increases of 30,000 bpd while the United Arab Emirates added 10,000 bpd.
Iran, exempt from making output cuts, has been shipping more to China in recent months although there was no significant change in its output in March, the survey found, as talks on reviving its 2015 nuclear deal with world powers continue.
Production in Venezuela, another exempt producer, continued to edge higher. Production did not increase in Equatorial Guinea or Gabon, the survey found, owing to a lack of capacity to produce more.
On Thursday, US oil prices fell 7 per cent to close just above $100 on Thursday as President Joe Biden announced the largest ever release from the US Strategic Petroleum Reserve and called on oil companies to increase drilling to boost supply.
US West Texas Intermediate futures for May delivery settled down $7.54, or 7 per cent, at $100.28 a barrel, after touching a low of $99.66.
Brent crude futures for May, which expired on Thursday, closed down $5.54, or 4.8 per cent, at $107.91 a barrel. The more actively traded June futures were down 5.6 per cent at $105.16, after falling by $7 earlier in the session.
Both benchmarks posted their highest quarterly percentage gains since the second quarter of 2020, with Brent soaring 38 per cent and WTI gaining 34 per cent, boosted mainly after Russia’s February 24 war of Ukraine which Moscow calls a “special operation.”
“This is a market where every barrel counts and (the SPR release) is a significant volume of oil to be put on the market for an extended period of time,” said John Kilduff, a partner at Again Capital LLC.
Biden’s 180 million-barrel release is equivalent to about two days of global demand, and marks the third time Washington has tapped the SPR in the past six months.
Starting in May, the United States will release 1 million barrels per day of crude oil for six months from the Strategic Petroleum Reserve, Biden said, adding that 30 million to 50 million barrels of oil could be released in addition by allies and partners.
“We need to increase supply… Oil firms sitting on idle wells or unused leases will have to start producing or pay for their inaction,” he said.
Other members of the International Energy Agency may also release barrels to offset lost Russian exports after that nation was hit with heavy sanctions for its invasion of Ukraine.
Meanwhile, the Organization of the Petroleum Exporting Countries and allies including Russia, known as OPEC+, agreed at a meeting on Thursday to stick to its existing agreement and raise its May production target by 432,000 barrels per day (bpd).
“In the light of the overnight developments, the OPEC+ decision seems to be a non-event. The increase of 432,000 bpd has been expected and built into the price. The decision will be greeted with disappointment from consuming nations,” said Tamas Varga at PVM Oil Associates.
Prices also declined due to fears of lower demand in China as Shanghai is set to expand a Covid-19 lockdown. (REUTERS)