OPEC and its allies agreed to revive more halted oil production, yet the group’s increasingly obvious struggles to fulfill its supply pledges left markets fearful of a potential shortfall, AzVision.az reports citing Bloomberg.
The 23-nation coalition led by Saudi Arabia rubber-stamped a nominal increase of 400,000 barrels a day for March, but data continue to show most members failing to provide their share of even this modest increment. Lack of investment or militia unrest are taking a toll on exporters from Nigeria to Libya, placing an increasing strain on the remaining reserves of Middle Eastern countries.
The group’s shortcomings have helped propel crude prices to a seven-year high above $90 a barrel, as supplies fail to keep pace with the vigorous post-pandemic rebound in fuel consumption. The rally is whipping up a wave of inflation that’s frustrating central banks and inflicting a cost-of-living crisis on millions -- a particular danger for President Joe Biden ahead of this year’s midterm elections.
With spare capacity now largely confined to Saudi Arabia, the United Arab Emirates, Iraq and Kuwait, traders are growing anxious over what’s available to cover any disruptions -- whether deeper losses in Libya, another attack like last month’s drone strike in Abu Dhabi, or tensions between Russia and the West over Ukraine.
“Core to our bullish oil price view is the now historically low levels of the oil market’s two buffers: inventory and spare capacity,” analysts at Goldman Sachs Group Inc. led by Damien Courvalin said in a report. “Even if OPEC+ were ramping up faster, this would only come at the expense of a critically lower level of spare capacity.”
The Organization of Petroleum Exporting Countries and its partners ratified their scheduled increase at a short online meeting on Wednesday. The group has made identical promises for several months, however, and been unable to fully implement them.
OPEC+ will meet again on March 2.
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