OPEC & Oil Output May Drop In Months Ahead – IEA

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OPEC & Oil Output May Drop In Months Ahead – IEA

The Organization of Petroleum Exporting Countries and its allies (OPEC+) will probably not carry out the anticipated increase in oil output in the upcoming months due to a lack of spare capacity, according to the International Energy Agency (IEA).

In reality, as Russian output decreases, the 100,000 barrels per day (bpd) production target increase that OPEC+ set for September may really end up being a production cut.

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The IEA monthly report for August 2022, which was published on Thursday, includes this disclosure.

This is because the United States is pressuring oil producers to raise output while crude oil prices continue to trade below the $100 per barrel threshold.

OPEC & Oil Output May Drop In Months Ahead – IEA

What the IEA report is saying

IEA in the monthly report said, “Comparatively low levels of operational spare production capacity, held mainly by Saudi Arabia and the United Arab Emirates, may thus all but rule out substantial further OPEC+ output increases in the coming months.’’

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The IEA further stated that the production cut forecast will fall squarely on the shoulders of other oil producers outside of the OPEC+ group to satisfy the projected 2.1 million bpd growth in global oil demand in the second half of the year.

However, it stated that while they were still anticipating a drop in Russian crude oil output, they had upgraded their view for the global oil supply since they now believed that Russia’s supply declines would be more constrained than they had anticipated.

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The Non-OPEC+ supply is expected to increase by 1.7 million barrels per day in 2022 and 1.9 million in 2022, according to the Paris-based organization that provides statistics, analysis, and recommendations on the global energy industry. Although that represents a big improvement over the previous year, it is still unable to meet the 2.1 million barrels per day increase in demand anticipated for 2022 and 2023.

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OPEC & Oil Output May Drop In Months Ahead – IEA

What you should know

OPEC+ had in its last meeting which was held on August 3, 2022, acknowledged its ‘severely limited’ spare capacity which necessitates using it with great caution in response to severe supply disruptions.
The meeting noted that chronic underinvestment in the oil sector has reduced excess capacities along the value chain (upstream/midstream/downstream).
It also highlighted with particular concern that insufficient investment into the upstream sector will impact the availability of adequate supply in a timely manner to meet growing demand beyond 2023 from non-participating non-OPEC oil-producing countries, some OPEC Member Countries and participating non-OPEC oil-producing countries.

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