With recession fears mounting and prices softening, a shift in OPEC+ approach regarding return of cut barrels would be counterintuitive at this stage, Trend reports with reference to Fitch Solutions.
“OPEC+ is scheduled to return the last of the cut barrels to market this month, ahead of the deal’s expiry in December. However, as of June, OPEC-10 was producing 1.06mn b/d below its monthly target, led by Nigeria (-534,000b/d) and Angola (-298,000b/d). The declines in both countries’ output are largely structural in nature and neither is in a position to meaningfully increase their output over the near term. The bulk of spare capacity in the group is held by Saudi Arabia and the UAE and, to a lesser degree, Kuwait and Iraq. As of September, under the terms of the deal these countries should have scope to raise their output towards their reference production levels, which, on paper, amounts to more than 1mn b/d of added supply. In practice though, they are unlikely to rapidly increase their output. The group has firmly resisted calls to meaningfully accelerate the return of its cut barrels, despite soaring global oil prices,” reads the latest report from Fitch Solutions.
Meanwhile the company’s production outlooks for Libya and Iran are at rising risk.
“In Libya, there are currently two opposing governments in play, the Tripoli-based Government of National Unity and the eastern-based Government of National Stability. In our view, neither has the capacity to effectively oust the other, pointing to an ongoing and uneasy coexistence between the two. This, in turn, points to a fragile security environment and elevated risks to production. Output currently stands at around peak capacity of 1.2mn b/d, but has been highly volatile over recent months and will likely be subject to repeated outages, until the political situation stabilizes. In Iran, we currently forecast meaningful supply growth of 11 percent this year and 13.8 percent the next. However, this hinges on the conclusion of the nuclear deal. If a deal cannot be reached within the next month or so, it will likely be delayed well into next year, as the White House refocuses its efforts on the upcoming midterm elections in November,” the report says.