OPEC to shoot up oil output this year

Sopuruchi Onwuka

Cumulative crude oil output by the Organization of Petroleum Exporting Countries (OPEC) will rise by significant 2.7 million barrels per day in 2022, according to the Energy Information Administration (EIA) of the United States.

The agency which provides critical energy data for the US government stated in its popular Short Term Energy Outlook (STEO) that OPEC would in 2022 post the highest year on year oil production in the past 18 years.

The EIA stated in the STEO which was published today that the production rise would be the biggest annual jump since 2004.

The forecast, according to the agency, is based on the interpretation of the January 2022 OPEC+ meeting, when participants reaffirmed their decision to continue to increase output by 0.4 million b/d each month until all of the production cuts are reversed.

“We expect that recent production disruptions in Libya will be more than offset by production increases from other OPEC members,” the EIA stated in the report.

Libya’s crude oil production averaged nearly 1.2 million barrels per day (b/d) in 2021; even though armed militants had last December shut in an estimated 370,000 barrels per day from the four key oil fields in the southwestern part of the country.

“We estimate that 0.4 million b/d of crude oil production went offline in Libya in late December 2021. This unplanned outage contributed to the increase in the Brent crude oil spot price to $90 per barrel (b), as of January 19, 2022, which was $16/b more than the December average. This January daily high was the first time the Brent crude oil price had reached $90/b since October 2014.

“Heightened political risk following the delay in Libya’s presidential and parliamentary elections which were scheduled for December 24, 2021 continues to create uncertainty.

“In addition, ongoing maintenance on the country’s aging infrastructure also continues to limit oil production in Libya,” EIA stated in the January STEO.

The January STEO estimated unplanned production outages in OPEC countries at 2.2 million b/d by December 2021 as a result of this disruption in Libya. It added that production would remain suppressed in parrier nations of Iran and Venezuela as a result of prevailing trade sanctions.

“Our forecast assumes that the sanctions that are constraining petroleum exports from Iran and Venezuela will remain in place through the end of 2023,” EIA stated; adding that OPEC would like;y unlock its spare production capacity to fill gaps the group’s supply surge in the market.

The Oracle Today reports that OPEC and its coalition members had jointly shut in over 10 million barrels per day of crude oil production to counter demand destruction wreaked on the market by worldwide lockdowns against the COVID-19 pandemic.

The EIA stated that spare production capacity that accumulated from production suppression in 2020 and 2021 could be unlocked cover unplanned output disruptions and still boost supplies in 2022.

Despite the recent increase in unplanned outages, we estimate that OPEC members still have more surplus production capacity than they have had on average in the past, the EIA sgtated.

“OPEC’s surplus crude oil production capacity increased to nearly 9 million b/d in mid-2020 as the onset of the COVID-19 pandemic greatly reduced demand, causing producers to lower output.

“OPEC’s surplus capacity has fallen since then and most recently averaged 4.6 million b/d in December 2021. We forecast OPEC crude oil production will increase by 2.5 million b/d to an average of 28.8 million b/d in 2022,” the agency stated.

The Oracle Today reports that OPEC and participating non-OPEC oil-producing countries had at the end of the 23rd OPEC and non-OPEC Ministerial Meeting (ONOMM) held via videoconference last December reaffirmed their decision to increase monthly overall production by 0.4 million b/d for the month of February 2022.

The 20 coalition members preferably called OPEC+ which are bound in guided output increase will jointly produce 40.894 million b/d in the month.

Under the deal, the 10 OPEC members bound by output quota will collectively pump 24.808 million b/d in February, and the 10 Non-OPEC members will jointly produce 16. 086. Total additional production of 4.107 million b/d from countries-Iran, Libya and Venezuela-are not captured in the figures.

OPEC stated in its Monthly Oil Market Report for January that Iran produced 2.404 million b/d in 2021. Libya pumped at the rate of 1.149 million b/d, and Venezuela produced 0.554 million b/d of oil in the year.

In referring to preliminary data OPEC puts global liquids production in 2021 at an average of 98.51 million b/d.

The 25th OPEC and non-OPEC Ministerial Meeting is scheduled to hold next week on February 2, 2022.