KUALA LUMPUR, March 2 (Bernama) -- The Organisation of the Petroleum Exporting Countries and its allies (OPEC+) latest decision to increase its crude oil production target by 206,000 barrels per day (bpd) for April is a signal that the grouping is prepared to use spare capacity if needed.
Independent research and energy intelligence company, Rystad Energy said however, OPEC+ is not willing to open the taps aggressively at this stage, with effective spare capacity currently at around 3.5 million bpd.
This is a critical buffer that cannot be deployed too quickly without reducing the group’s ability to respond to a larger disruption, it said in a note today.
“Importantly, this increase is unlikely to calm markets in the immediate term. Price direction on Monday will depend far more on developments in the Gulf and the status of transit flows than on a 206,000-bpd adjustment to production targets,” the firm said.
Rystad Energy senior vice-president/head of geopolitical analysis, Jorge Leon said OPEC+ has raised output beyond the initial expectation of 137,000 bpd, but stopped short of a more forceful increase, underscoring the tightrope it walked between responding to near-term geopolitical risk and avoiding oversupply later this year.
“The bigger issue is physical reality: roughly one-fifth of global oil supply passes through the Strait of Hormuz, a vital artery for world trade, meaning markets are more concerned with whether barrels can move than with spare capacity on paper.
“If flows through the Gulf are constrained, additional production will provide limited immediate relief, making access to export routes far more important than headline output targets,” Leon said.
At the same time, Rystad Energy noted that Saudi Arabia has already been increasing exports in recent weeks, with shipments reaching their highest level in three years, indicating that part of the supply adjustment was already underway ahead of the formal decision.
It added that in absolute terms, 206,000 bpd was small compared to global demand of more than 100 million bpd, and on its own, it does not materially change the balance.
At the time of writing, Brent crude jumped 4.54 per cent to US$76.18 per barrel.
-- BERNAMA
