OPEC+ powerless as Ukraine conflict pushes up prices

The OPEC+ cartel of major oil producers at their monthly meeting on Wednesday is likely to be powerless to control prices, which have soared above $100 after Russia’s invasion of Ukraine.

With some members not meeting their monthly production quotas, the group is not expected to be able to control wild swings in oil prices, analysts say.

“Only Saudi Arabia and the United Arab Emirates, and perhaps Kuwait, could increase production in the short term,” Tamas Varga of PVM Energy told AFP.

But the group’s leader, Saudi Arabia, earlier this year reiterated its policy of strict adherence to the terms of the OPEC+ deals and the quotas agreed upon in them.

He confirmed his commitment to the OPEC+ deal with Russia on Sunday, according to the Saudi Press Agency, as Moscow faces international criticism over the Ukraine conflict.

Crown Prince Mohammed bin Salman during a conversation with French President Emmanuel Macron “affirmed the kingdom’s enthusiasm for the stability and balance of the oil markets and the kingdom’s commitment to the OPEC+ agreement,” the agency added.

Underinvestment, instability
While Saudi Arabia is seen as the kingpin of the 13 OPEC member states, Russia is the main player among the other 10 countries that make up OPEC+.

The 23 countries will meet by teleconference on Wednesday, facing prices not seen since 2014.

It will aim to fulfil its mission of “stabilizing oil markets,” particularly at this time of “extreme oil price volatility,” according to Stephen Brennock, an analyst at PVM Energy.

Between December and January, OPEC members boosted their production by 64,000 barrels per day (bpd), reaching a total of about 27.981 million bpd, according to the organization’s latest monthly report.

But this is well short of the 400,000 bpd surge target the group has been targeting since May 2021, when it embarked on a gradual reopening of taps to accompany the global economic recovery following the impact of the first waves of COVID-19. 19.

“Covid has hit African economies the hardest and Nigeria and Angola have struggled to sustain investment in infrastructure with new and existing wells,” Edward Moya, an analyst at Oanda, told AFP.

“Years of underinvestment and political instability have lent themselves to severely limited spare capacity in places like Nigeria, Angola and Libya,” according to analyst Han Tan of Exinity.

The latest OPEC report says that Congo and Equatorial Guinea produced much less than expected in January.

Since May 2021, the level of crude oil produced by OPEC members has been just shy of 750,000 bpd below the authorized limit.

According to Carsten Fritsch, quoted in a Commerzbank analysis, the gap will only widen unless Saudi Arabia and other countries with a spare capacity step in with higher production.

Iranian production ‘unlocked’?
“At the moment, there is also apparently no desire to ease market conditions, with producers capitalizing on high prices that they don’t see as too damaging to the economy after years of very low prices,” Oanda’s Craig Erlam told AFP.

Wednesday’s meeting also comes at a key moment for negotiations to revive the 2015 Iran nuclear deal, which are expected to come to a head in a matter of days.

The deal provided sanctions relief for Tehran in exchange for tight restrictions on its nuclear programme, but has been unravelling since former US President Donald Trump withdrew from it in 2018 and reimposed sanctions. even to Iran’s oil exports.

If a deal were to be reached and it could “unlock Iranian exports in the coming weeks, that would add some 800,000 barrels of additional supply per day,” Swissquote bank analyst Ipek Ozkardeskaya told AFP.

That would greatly increase the amount of crude on world markets and act as a considerable damper on price rises. (TheGuardian)