Opec and its allies’ decision to boost oil production starting next month is expected to ease the anxiety of top oil importing countries. Oil prices hit $80 a barrel this year for the first time since 2014, prompting top consuming countries to raise concerns.
In the past week, Opec and its allies agreed on a “nominal” production increase of one million barrels a day. In reality, several ministers said the accord will add a smaller amount of oil to the market -- about 700,000 barrels a day-- because a number of countries are unable to raise their output.
The final communique from the group’s meeting in Vienna left many unanswered questions about how the oil will flow to consumers. The document didn’t mention the details of the production hike, instead pledged that the group would focus on rolling back the deeper-than-intended cuts from nations such as Venezuela, returning their curbs to the level originally agreed in 2016.
QNB analysts said yesterday that while details of the Opec and Russia (OPEC+) deal on production increase remains cloudy with no formal output targets provided, a supply increase of up to a 1 million barrels per day (bpd) over the next six months looks likely. Partly reflecting the agreement’s lack of precision, spot oil prices have been volatile in the aftermath, they said.
In the US, crude explorers scaled back drilling in the oil fields by the most in three months after the world’s top exporters agreed to raise production. US working oil rigs fell by four this week to 858, according to data from Baker Hughes. It was the second straight weekly decline and the largest drop since March.
Kuwait yesterday announced it will raise oil output by 85,000 barrels per day (bpd)starting today, part of an agreement between Opec and non-Opec producers to increase production by one million bpd, Energy Minister Bakhit al-Rashidi told a local newspaper yesterday.
Meanwhile, analysts doubt the OPEC+ group’s decision to raise output may not do much to help world’s top importing countries. The 600,000 to 700,000 bpd increase can be easily absorbed by the market. Hence, it is unlikely to bring down crude oil prices significantly.
If anything, Brent crude prices rose 2.56 percent to nearly $75 a barrel soon after the announcement, indicates that the market had discounted a 1mbpd raise in output and in output and had expected more.
