At its meeting yesterday, the Joint Ministerial Monitoring Committee (JMMC) of the OPEC+ alliance recommended against altering the organization’s output policy.
The JMMC, which is composed of important OPEC+ ministers, has the power to recommend holding an extraordinary ministerial meeting if market conditions warrant it, but it does not have the capacity to make decisions. Instead, it bases its recommendations on its analysis of the oil market. OPEC+’s ministerial conference is currently scheduled for June.
The JMMC’s recommendation to maintain the present crude production targets is made against the backdrop of the same supply and demand concerns that supported the group’s decision to roll over output restrictions in December, particularly the prognosis for Chinese and Russian exports.
According to the latest crude oil and condensate production data for December 2022 provided by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Nigeria’s crude oil output grew to an average of 1.23 million barrels per day (bpd) in December from 1.18 million bpd in November.
A Reuters survey conducted on Tuesday also revealed a fall in Iraqi exports although Gulf States continued to adhere strictly to an OPEC+ agreement on output cuts to stabilize the market.
According to the report, the OPEC produced 28.87 million barrels per day (bpd), which is 50,000 bpd less than in December. OPEC output reached its highest level since 2020 in September.
The poll indicated that Nigerian output, which had recovered in December, remained steady in January, meaning that more work needs to be done if the nation is to fulfill its goal of increasing output to 1.6 million bpd this quarter.
As a result of many producers’ inability to pump at the agreed-upon rates, particularly those in Nigeria and Angola, output is far below target levels.
The EU’s embargo on Russian oil products is set to take effect in February, which will affect supplies. Its effects, together with those of the G7-led $60/bl price restriction on Russian oil sales and the prohibition on imports of Russian petroleum by sea, are still unknown.
While Russian oil shipments have so far held up against the embargo, President Vladimir Putin’s order prohibiting Russian producers from selling under the conditions of the price ceiling may have an impact on output.
Another significant concern on the demand side relates to how quickly China will recover after Beijing decided to drop its zero-COVID policy in December.
It may take several months before the economy of the world’s top petroleum importer fully recovers to pre-pandemic levels, but there are signs that it is improving, providing a sturdy bottom for oil prices.
According to Opec’s most recent prediction, Chinese oil demand will rise by 510,000 b/d this year after falling by an anticipated 210,000 b/d in 2022.