OPEC+’s oil output target averaged more than 800,000 barrels per day last year, data seen by Reuters showed, costing billions of dollars in lost revenue and hurting group members struggling to raise funds to invest.
Based on an average price of $70 a barrel for OPEC’s crude basket, the 800,000 barrels per day (bpd) loss of production — about half of Britain’s daily consumption — is equivalent to about 100,000 bpd in lost revenue for the group in 2021, Reuters calculations show. to $21 billion.
Following record production cuts in 2020, OPEC+, comprising the Organization of the Petroleum Exporting Countries and allies led by Russia, has been gradually easing restrictions as demand recovers from the worst impacts of the COVID-19 pandemic.
But not all producers have kept up with the growing output targets, especially West African producers Nigeria and Angola, which have faced power outages and limited investment.
Even as other companies’ production targets are met — output across the group has recently grown at a rate of 400,000 barrels per month — analysts say spare capacity has been cut.
Spare capacity, i.e. production that can be started at short notice, is an important buffer to protect the market from any shocks, smoothing out price swings and spikes.
“Spare capacity remains extremely low, and concerns about production capacity in Russia, Kuwait and Iraq may emerge in the summer, when demand increases seasonally and international travel reopens,” Goldman Sachs wrote in a note.
OPEC+ is expected to stick to its previously agreed plan to raise March output by 400,000 bpd when it meets on Wednesday, although two OPEC+ sources told Reuters the surge in oil prices could prompt the group to consider other measures.
Benchmark Brent crude traded above $90 a barrel this month, hitting a more than seven-year high. At $88.85 GMT at 1202, it was more than $20 above the 2021 average.
A Reuters survey of OPEC’s output on Tuesday found that the group overall fell short of its planned output growth in January and even more than in December.