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An oil field in eastern Siberia. Russia is OPEC Plus’s second-largest oil exporter, but analysts have questioned its ability to boost...

Credit…Sergei Karpoukhin / Reuters

Officials from OPEC, Russia and other oil producers agreed on Tuesday to continue their program of monthly production gradually increases in February, increasing production by 400,000 barrels per day, but growing doubts are emerging as to their ability to deliver the additional barrels.

A persistent failure to increase production on an approved schedule in July helps keep oil prices relatively high, even as an increase in cases of the Omicron variant coronavirus threatens to slow economic activity and demand for oil.

A few producers of the OPEC group over 23 members, including Saudi Arabia and Iraq, easily increase their production, but others are lagging behind. A range of issues, including political conflicts and underinvestment in drilling, are holding them back.

The slow ramp-up in production could lead to tensions with the Biden administration, which wants producers to pump more oil in a bid to lower gasoline prices in the United States. According to the Energy Information Administration, a government agency, gas prices, at $ 3.28 per gallon, are now about a third higher than a year ago, and are contributing to rising inflation.

What Saudi Arabia decides to do is crucial. The most logical path to meet the planned production increases would be for Saudi Arabia, which now has most of the world’s additional capacity, to agree to produce more than its quota.

At this point, the dynamics of the oil market are benefiting producers like Saudi Arabia who have continued to invest in their energy industries. Reflecting Arabia interest in avoiding overproduction, a statement released after Tuesday’s meeting mentioned “the critical importance of adhering to full compliance” on quotas. There was no sign of concern about producing less than these allowances.

Saudi Arabia, leader of the Organization of the Petroleum Exporting Countries, has much to celebrate. Saudi production is back to around the 10 million barrels per day level the kingdom prefers, prices are relatively high, and Riyadh’s influence on oil policy is strong.

“If they didn’t have to deal with Washington, that would be a very optimal outcome,” said Helima Croft, head of commodities at RBC Capital Markets, an investment bank, of OPEC’s big producers. .

In November, the White House coordinated a planned release strategic oil reserves with other countries in a bid to soften the market, but prices have since risen slightly and continued to rise on Tuesday. Brent crude, the international benchmark, was once again selling for over $ 80 a barrel, while West Texas Intermediate, the US standard, was above $ 77 a barrel.

In the spring of 2020, at the start of the pandemic, OPEC Plus sharply reduced production by nearly 10 million barrels per day, or nearly 10% of world supply at the time.

Restoring production has not been easy for several countries, including Nigeria and Angola.

In its December monthly oil report, the International Energy Agency estimated that OPEC Plus was below its November target of 650,000 barrels per day, far more than the 400,000 barrels per day it the group had planned to increase each month.

Even Russia, the group’s second largest exporter after Saudi Arabia, appears to have hit a wall at around 9.9 million barrels per day, around 600,000 less than it pumped in April 2020 before the big cuts. and well below Russia’s 10.2 million barrels per day. allocation for next month Saudi Arabia has the same quota. For Russia to grow significantly from here, it will require improved fiscal policies and the development of new areas, analysts said.

“Russia is temporarily close to its limits,” said Bhushan Bahree, executive director of IHS Markit, a research firm.

Nigeria, Africa’s largest producer, in November pumped 360,000 barrels per day below its quota – almost enough on its own to offset the agreed monthly increase of 400,000 barrels per day across the board. of the group. “Poor regulatory framework, sabotage and vandalism of oil installations” discourage necessary spending in Nigeria, the International Energy Agency said in its report.

Angola, another African country, is also pumping well below its quota, while Libyan production recently fell rapidly due to political unrest.

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Newsrust - US Top News: Today's business and stock market news: live updates
Today's business and stock market news: live updates
Newsrust - US Top News
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