At its latest meeting, the OPEC+ production group has decided against making any changes to its output targets.
The meeting was reportedly brief and involved only seven core members, namely Russia, Oman, Saudi Arabia, Iraq, Kazakhstan, Kuwait and Algeria. Market expectations are that there will be no adjustments to production quotas this year. Around 2 million barrels per day (bpd) in cuts are still in effect among most OPEC+ members. Gulf producers, however, have generally been pumping well below capacity amid the shipping disruption in the Strait of Hormuz.
Reuters reports Giovanni Staunovo, an analyst at UBS, as saying:
“The OPEC+ group of seven kept their production ceilings unchanged, in line with market expectations. That said, despite rising flows through the Strait of Hormuz, their output levels remain well below quota. Consequently, the oil market remains tight.”
In recent months, exports from OPEC+ producers in the Gulf have been varying between 60% and 80% of normal. This has caused the market to rely more on sources outside the Gulf. For example, ExxonMobil, the maker of the Mobil DTE hydraulic oil, produces considerable volumes in the US and Guyana. OPEC data does show a modest production increase of 630,000 bpd to 25 million bpd in August. Nevertheless, this is still 5 million bpd less than in February.
In addition to suppressed production, OPEC+ is also facing uncertainty about future quotas due to its capacity review being delayed. This is vital because baseline production capacity will determine how production quotas will be allocated among participating nations for next year.
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