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The OPEC+ group lifted its production in August, but underinvestment and maintenance work has hampered the group’s ability to raise production—and supply could be insufficient to meet the world’s growing oil demand, Reuters suggested on Tuesday.
Global oil demand has recently risen to near-record levels as global activity picks up steam despite the pandemic.
In response, OPEC+ agreed to increase oil production starting in August by another 400,000 bpd each month. But not all producers have responded to the call for more barrels.
Angola, Nigeria, and Kazahkstan have been unable to lift their oil production to meet the call for more oil. In Kazakhstan’s case, this was due to maintenance in its Tengiz field—maintenance which ended mid-September. For Angola and Nigeria, years of underinvestment in their oil industry has rendered them unable to respond quickly to increased demand.
The current plan is for OPEC+ to continue increasing production by another 400,000 bpd in October and another 400,000 bpd in November.
Two Reuters sources said on Tuesday that OPEC+’s compliance with the cuts rose to 116% in August, excluding Mexico.
Meanwhile, U.S. production has also been hampered—in this case, due to Hurricane Ida. Production has dipped by 1.5 million bpd in recent weeks, adding to the tight supply situation created by OPEC+’s underperformers.
Add to what some see as inadequate production the tight supply situation for natural gas in Europe. This could also increase the demand for crude oil and gas supplies run thin.
Iraqi Oil Minister Ihsan Abdul Jabbar said over the weekend that if all goes to plan, the market will remain in balance through Q1 2022, with Brent at $70 per barrel, if OPEC+ sticks to its plan.