OPEC+ changes course, new plans don't add up

May 05, 2022 8:23 AM ETXLE, USOBy: SA News Team98 Comments

Petroleum, petrodollar and crude oil concept : Pump jack and flag of OPEC or Organization of Oil Exporting Countries

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  • After almost a year of OPEC+ marching ahead with 400kb/d monthly supply increases, the group has finally changed course (USO) (XLE).
  • In June, OPEC+ plans to increase supply by 432kb/d, a signal to customers that the group is doing its best to manage prices.
  • Importantly, it is generally agreed that the excess capacity in OPEC lies in Saudi and the UAE, so any genuine attempt to increase production would over-allocate quota to those countries.
  • However, the ~8% quota increase was allocated pro-rata; Nigeria has not hit quota in months, and is ~400kb/d below recent targets, nevertheless Nigeria's quota for June was lifted just as much as Saudi's quota, on a percentage basis.
  • Russia's quota for June was increased just as much as the UAE's, on a percentage basis, and as much as Saudi's in absolute terms.
  • By changing course the group appears to acknowledge calls for more barrels; however, the unserious details of the plan suggest OPEC+ is either unable or unwilling to increase production.

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