OPEC-Plus Keeps Production Steady Even as EU Oil Ban Looms
OPEC and an allied group of oil-producing countries on Thursday agreed to extend a measured pace of production increases through June. The cartel said in a brief statement that a modest bump next month would support a balanced global market by the end of June.
Specifically, OPEC-plus said it would target a 432,000 b/d increase in June, holding to a gradual pace of escalation launched last August. Since then, the cartel has targeted monthly output bumps of about 400,000 b/d. The Saudi Arabia-led consortium is methodically unwinding nearly 10 million b/d of cuts made in 2020 in response to the initial demand destruction imposed by the pandemic.
The decision, however, comes on the heels of a European Union (EU) proposal on Wednesday to ban Russian crude within six months in protest of the Kremlin’s invasion of Ukraine. That would follow a U.S. embargo on Russian energy imports that, in concert with Western economic sanctions, pushed an estimated 1 million b/d off the global supply table. An EU ban could more than double that figure or force Russia to sell its crude at steep discounts to Asian countries, according to Rystad Energy.
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A vote on the proposal could come as soon as this week. Prior to the war, the EU was importing between 3.0 million b/d and 3.5 million b/d from Russia, according to the International Energy Agency.
Analysts at ClearView Energy Partners LLC also noted that OPEC-plus has struggled to meet its targeted increases in recent months amid political strife and aging infrastructure in some member countries.
OPEC-plus, however, noted coronavirus flare-ups in China, which have curbed demand from that major oil-consuming country this spring. It also said the war in Ukraine presents added demand uncertainty.
While OPEC researchers in April estimated that global demand would grow by 3.7 million b/d to 100.5 million b/d this year, the projected increase was about 500,000 b/d lower than a March forecast.
American oil producers also are forging ahead carefully. They raised output to a 2022 high of 11.9 million b/d in April, according to the U.S. Energy Information Administration (EIA). Still, that was up modestly from the 11.6 million b/d level at which output held most of the first quarter, and it was more than 1 million b/d below the pre-pandemic high.
Total consumption of U.S. petroleum products has been uneven this year as well, amid high oil prices. EIA said demand in April averaged 19.3 million b/d, down 3% from a year earlier.
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