OPEC+ and its allies on Wednesday indicated that it would aim to raise production by another 400,000 barrels a day in March, continuing with its monthly plan in July last year to gradually replace the output cut experienced at the start of the pandemic.
This decision would represent the eighth consecutive month the group would agree to increase its production quota, even though data has revealed that some countries are struggling to keep up with the monthly increases in output.
The gradual rises in production have helped oil rally strongly in 2022, surpassing a seven-year high in January to trade at more than $90 a barrel for the first time since 2014. Brent rose as much as 1.1 percent on Wednesday to a high of $90.52 a barrel following the Opec decision, while US benchmark West Texas Intermediate was up as much as 1.6 percent to $89.72.
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The rally since the start of the year has been supported by resurgent demand and concerns that potential instability in Europe, the Middle East and north Africa might disrupt future supply.
In December, OPEC+ managed to increase output by only 250,000 b/d after Nigeria alongside Angola, Russia, and Malaysia all underproduced.
Data culled from the group’s joint technical committee revealed that Opec+ production was 824,000 barrels a day lower than its target by the end of December.
The missed targets led some traders to question whether Opec+ (Saudi Arabia, United Arab Emirates, Iraq, and Kuwait) would have sufficient spare capacity to meet global demand in the event of a sudden disruption to a leading source of supply.
Goldman Sachs, which has forecast oil prices to exceed $100 a barrel in the third quarter, expects OPEC+ spare capacity to reach “historically low levels” of about 1.2m b/d by the middle of the year.
Opec is scheduled to meet again on March 2.
