Higher oil production target for March remains
OPEC+ likely to stick to plans
OPEC+ is likely to stick to the planned increase in its March oil production target at next week's meeting on Wednesday, multiple producer group sources said, as it sees demand recovering despite downside risks from the pandemic and looming interest rate hikes.
While two OPEC+ sources said that oil prices at a seven-year high near $90 a barrel could prompt the group to consider further moves, the vast majority of sources said at the online meeting on March 2 February no new decision is expected.
A Russian source told Reuters the country is concerned the price hike could reignite a boom in US shale oil production.
“Given the upbeat projections for shale oil production in 2022, OPEC+ countries should be on high alert at this price level,” the source said.
The source added that high oil prices are also hurting Russian refiners' profit margins.
OPEC+, which brings together the Organization of the Petroleum Exporting Countries (OPEC), Russia and other allies, has raised its production target by 400,000 barrels per day (bpd) every month since August as it reverses record production cuts set in 2020.
Under current plans, OPEC+ would do this again in March.
"It is very likely that we will produce another 400,000 barrels per day," said one of the OPEC+ sources. "There are no reasons against it."
OPEC+ has resisted pressure from the United States to increase production at a faster rate since last year.
Despite the increased targets, OPEC+ actual output has not kept pace as some members struggle with capacity constraints, which has supported prices.
OPEC+ missed its production target by 790,000 bpd in December as members like Nigeria and Angola struggled to ramp up production, according to the International Energy Agency. [IEA/M]
Several banks and analysts, including Morgan Stanley (NYSE:MS) and JP Morgan, expect oil prices to surpass $100 a barrel later in the year amid tight OPEC+ spare capacity and strong demand.
However, some OPEC+ sources believe that the recent price increase is due to geopolitical tensions rather than fundamentals.
"This is to be expected given the Russian-Ukrainian tensions, but it's certainly not a supply issue," said one source of the $100 oil price outlook.