Opec+ ministers essentially met today to rubber-stamp the May output target, and they have refused to deviate from their plan of gradual production increases. The meeting takes place against a backdrop of increased political pressure on Opec+ to reconsider its approach in light of Western sanctions’ threat to Russian supply.
According to a statement, the cartel ratified the 432,000 barrel-per-day supply increase scheduled for May. The decision was expected and coincided with a significant intra-day drop in oil prices due to sources reporting that the White House is considering a record oil reserve release of up to 180 million barrels over the next several months (allegedly amounting to about 1M BPD).
Until now, OPEC+ nations have ignored calls from the United States and other major oil-consuming countries, such as India, to increase output faster.
According to sources, the OPEC+ report stated that downside economic risks have become more pronounced and that “conflict in eastern Europe” has resulted in rising prices and increased global inflation.
Furthermore, OPEC+ stated that the IEA’s decision to release 61.7 million BPD of oil stock is the largest in history, but it has failed to reduce market volatility.
According to sources, the next OPEC+ meeting will be held on May 5.
The OPEC+ Joint Ministerial Monitoring Committee, which meets ahead of the main OPEC+ meeting of oil ministers, also recommended that the group raise its output quotas by 432,000 barrels per day (BPD) beginning in May.
Since August 2021, OPEC+ has increased output targets by 400,000 BPD.
The increase is not a concession to consuming countries demanding more oil but rather internal recalculations of reference production levels, resulting in higher baselines for Saudi Arabia, Russia, Iraq, the UAE, and Kuwait.
Crude Oil Prices
Brent crude, the international benchmark, was down 5.2% at $107.54 at the time of writing. On the other hand, West Texas Intermediate (WTI) crude was down 5.5% to $101.80.
According to a Reuters poll conducted today, Brent crude oil price is expected to average $103.07/barrel in 2022 and $90.39 in 2023, up from $91.15 and $82.94 in the previous poll.
In contrast, U.S. oil is expected to average $98.49/barrel in 2022 and $86.45 in 2023, up from $87.68 and $78.99 in the previous poll.