This isn’t a surprise but OPEC+ will continue to boost production by 137K in October after hiking by that exact amount in September.
The market saw the September announcement as the baseline going forward, until brent prices fall below $60 or OPEC spare capacity is exhausted. I
The latest report from Reuters cites three sources familiar with OPEC talks.
So far this year OPEC+ has raised output by 2.5 mbpd into a soft economy. That’s made oil a big underperformer in the commodity space but it hasn’t been as bad as it could be. That’s partly because China has been building oil inventories.
This is a useful chart from before the prior meeting and it’s that blue zone that’s now being eroded by 137K bpd per month. It totals 1.65 mbpd so it should take about 11 more months to unwind.
There are also increasingly-convincing reports saying that OPEC is struggling to pump at its current quotas.
OPEC+ has delivered about three quarters of the extra oil output it
targeted since the group started production hikes in April, and the
level may fall closer to half later in the year as producers hit
capacity limits, sources and analysts said and data showed.
Reuters suggests that since April, OPEC+ has only delivered 75% of pledged production increases, leaving a shortfall of 500k bpd, with Saudi Arabia, Russia and Iraq making up the vast majority of the shortfall.
“One OPEC+ delegate, who declined to be named because of the sensitivity
of the matter, said most member countries cannot produce more,” the report says.
If that’s true (and shale growth continues to stagnate), we could soon be in a world of much higher oil prices.
