OPEC and its allies have firmly adhered to a moderate reduction in production quotas for several months. Now that winter has arrived, OPEC+ ministers are assessing whether to suspend the alliance's next planned increase of 400,000 barrels per day for January.
Spooked by the Black Friday oil sell-off and the emerging "Omicron" variant of COVID-19, some countries are calling for the group's monthly production spikes to be abandoned.
However, others remain focused on regaining market share, even accepting the risk of an escalating market downturn and an escalating dispute with the US after the Biden administration announced the release of 50 million barrels in the coming months from its strategic reserves in the US.
China, India, Japan, South Korea, and the UK also plan to sell about 20 million barrels or more of their national reserves in coordination with the US.
The OPEC+ coalition, consisting of 23 countries, which control about half of the world's oil supplies, has committed to gradually restoring production to pre-pandemic levels by the end of 2022, through a monthly increase of 400,000 barrels per day. But at the same time, it reserved the right to adjust production quotas, if necessary.
An internal OPEC analysis presented to ministers and delegates shows that global oil demand will grow by 4.15 million barrels per day in 2022. However, there is also a possibility that the increase plan could create an oversupply of about 2 million barrels per day in January, which will rise to 3.4 million barrels per day in February and 3.8 million barrels per day in March.
The analysis showed that the surplus will remain throughout 2022, although it will decrease in the second and third quarters as seasonal demand increases and some volumes of SPR are repurchased to replenish stocks.
OPEC ministers have already started the meeting with a virtual meeting. But on the first day, mainly internal official issues were discussed, such as approving the budget and discussing the next Secretary-General, with Mohammed Barkindo's term of office expiring at the end of July.
This was followed by a meeting of the OPEC + technical committee at the delegate level to review market forecasts.
Today, an online meeting of the OPEC+ Joint Ministerial Monitoring Committee, consisting of nine countries, co-chaired by Saudi Arabia and Russia, will take place.
U.S. officials, who have been putting strong pressure on the OPEC+ alliance to be more generous with oil supplies, have continued lobbying, while retail gasoline prices have not yet experienced the same decline as crude oil prices.
It is also worth paying attention to the negotiations on the nuclear deal with Iran, which are taking place near the OPEC secretariat in Vienna.
Despite the fact that most observers did not expect a serious breakthrough in the negotiations between the United States, European powers, and Iran, any hint of detente would mean progress towards a possible easing of sanctions, which could return up to 1.5 million barrels of Iranian oil per day.
This will become another serious problem for OPEC+, as the alliance seeks to strengthen its influence on the oil market.
