OPEC+ Flags Severely Limited Availability of Excess Capacity

The 31st OPEC and non-OPEC ministerial meeting, which was held via videoconference on Wednesday, offered several warnings, including the identification of a “severely limited availability of excess capacity”.

In the meeting, the group noted that this limited availability of excess capacity “necessitates utilizing it with great caution in response to severe supply disruptions”. The group also warned that “chronic underinvestment” in the oil sector has reduced excess capacities along the value chain and outlined that dynamic and rapidly evolving oil market fundamentals necessitated “continuous assessment” of market conditions.

“Insufficient investment into the upstream sector will impact the availability of adequate supply in a timely manner to meet growing demand beyond 2023 from non-participating non-OPEC oil-producing countries, some OPEC Member Countries and participating non-OPEC oil-producing countries,” a statement posted on OPEC’s website noted.

The statement highlighted that preliminary data for OECD commercial oil stocks level stood at 2,712 mb in June 2022, which it pointed out was 163 mb lower than the same time last year, and 236 mb below the 2015-2019 average. The statement also noted that emergency oil stocks had reached their lowest levels in more than 30 years.

At the latest meeting, OPEC+ decided to increase its production by 0.1 million barrels per day in September. According to a production table published on OPEC’s website, “required production” in September 2022 will be topped by Saudi Arabia and Russia, with 11.030 million barrels per day, each. Iraq’s required production is next highest in the table at 4.663 million barrels per day, followed by Kuwait at 2.818 million barrels per day.

At OPEC+’s previous meeting, which was held on June 30, the group reconfirmed its decision to increase its monthly overall production by 0.648 million barrels per day in August. OPEC+ is currently scheduled to hold its next meeting on September 5.

In a White House press briefing held on Wednesday, White House Press Secretary Karine Jean-Pierre was asked if President Joe Biden felt like the production increase was an insult, “given what the President has invested”. Responding to the question, Jean-Pierre said, “the fact of the matter is that oil and gas prices are coming down”. 

“They have been coming down since the President announced his trip. The moment he announced his trip, we saw gas prices and oil prices coming down. And so that is also important to note,” Jean-Pierre added in the statement.

“We’re not members of OPEC - of OPEC+, but we welcome … their announcement,” Jean-Pierre went on to say.

Last month, Enverus Intelligence Research cautioned about the limited benefits Biden’s trip to the Middle East would have on increased oil production or changes to crude prices.

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