OPEC Leaves Production Quota Unchanged, Keeps Additional Supply at 400,000 bpd

•Brent oil price hits $81.79

Emmanuel Addeh in Abuja

The Organisation of Petroleum Exporting Countries (OPEC) yesterday resolved to keep oil supply for November unchanged.

It also resolved to gradually ease production by the 400,000 barrels per day (bpd) agreement in July.

The decisions taken during the 21st OPEC and non-OPEC ministerial meeting held via videoconference and chaired by Nigeria’s Sanusi Barkindo, came as rather disappointing news to the United States and a few other countries which were hoping for a surprise increase in oil production.

In the middle of July, OPEC+ decided that it would start returning 400,000bpd to the market every month beginning in August, until it unwinds all the 5.8 million bpd cuts which it embarked upon last year April, following the devastating impact of the Covid-19 pandemic.

In a statement released after yesterday’s meeting, the oil cartel agreed to keep the production plans unchanged—adding back 400,000 bpd in November, like in previous months.

Although that was the original plan, but oil prices have been on the rise, and a gas crunch in Europe and in Asia, and pleas from the United States had given the market hope that OPEC+ may consider adding even more production back into the quota for next month.

But a quick 25-minute meeting ended the conjecture, even as Brent Crude, Nigeria’s oil benchmark, was trading up 3.17 per cent, adding $1.98 to close at $81.79—comfortably above the largely psychological $80 per barrel mark.

Similarly, West Texas International (WTI) was trading at $77.68, moments after the OPEC+ communiqué was released, a 2.37 per cent increase on the day or additional $1.80 per barrel.

The price spike was a fair indication that OPEC+ was for now in control of market prices and that U.S. shale’s day in charge has ended.

According to the statement, the OPEC decision was taken in view of current oil market fundamentals and the consensus on its outlook by OPEC and participating non-OPEC oil producing countries.

OPEC stated that it: “Reaffirmed the decision of the 10th OPEC and non-OPEC Ministerial Meeting on 12 April 2020 and further endorsed in subsequent meetings including the 19th OPEC and non-OPEC Ministerial Meeting on the 18 July 2021.

“Reconfirmed the production adjustment plan and the monthly production adjustment mechanism approved at the 19th OPEC and non-OPEC Ministerial Meeting and the decision to adjust upward the monthly overall production by 0.4 mb/d for the month of November 2021, as per the attached schedule.

“Reiterated the critical importance of adhering to full conformity and to the compensation mechanism taking advantage of the extension of the compensation period until the end of December 2021.”

It urged countries that were still defaulting to submit their compensation plans in accordance with the statement of the 15th OPEC and non-OPEC ministerial meeting, fixing its next conference on November, 4 2021.

OPEC also ignored a possible option that the group was considering an 800,000 bpd increase in November, followed by no increase in December. On the day, crude oil prices traded firm on the prospect of a pick-up in global growth, higher demand on global power shortage, lower supply and weak dollar.

The prices were supported after OPEC plus allies stuck to its production quota, refusing to increase output in November notwithstanding pressure from consuming nations to raise production.

Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), recently said Nigeria would be most comfortable with a $50 to $60 price so as not to push Nigeria’s customers to begin their search for alternatives.