OPEC+ may need to consider oil production capabilities next month

OPEC+ may need to consider oil production capabilities next month.

The UAE, Kazakhstan, and Iraq plan to increase their total capacity by more than
300,000 barrels per day by 2025.

 

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Supply Stability is a Challenge

 

 

 

 

 

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The key question to be posed at next month’s OPEC+ meeting is whether the alliance will continue to cut oil supplies in the second half of the year. However, it may also need to address the long-term issue of crude production capacities.

The Organization of Petroleum Exporting Countries and its allies are reviewing the amount of oil that members can pump. J.P. Morgan Chase & Co. believes that there are three main countries that deserve an upgrade in their supplies.

It was reported that the UAE, Kazakhstan, and Iraq intend to increase their total capacity by more than 300,000 barrels per day starting next year. Abu Dhabi has indicated a much larger increase, as the Abu Dhabi National Oil Company (ADNOC) announced this week an increase in its capacity by 200,000 barrels per day to 4.85 million barrels per day.

However, the planned expansions may pose risks to the cohesion of the alliance and to oil prices in general.

 

 

 

 

Supply Stability is a Challenge

Saudi Arabia, the leader of OPEC+, already has significant levels of surplus capacity,
and a slowdown in global oil demand growth is expected in 2025, according to Canive.
Achieving stability in global supplies, and thus supporting prices,
becomes an increasing challenge under these circumstances.

The report mentioned that “the main issue for OPEC lies in 2025,”
because even if the alliance maintains the supply restrictions as they are this year,
it “does not address the imbalances in 2025.”

It has proven to be a complex issue in the past for OPEC+ to accommodate the growth in member capacity. In 2021, the OPEC+ alliance nearly ended amid a dispute between the UAE and Saudi Arabia over Abu Dhabi’s expansion ambitions.
The issue came to the forefront again last year,
and eventually reaching a compromise led to Angola’s departure after decades of membership.”