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Just as they have every month since this past summer, officials from OPEC and its allies met via teleconference Thursday and decided to continue their program of modest additions to the market. The producers group, which has 23 members including Saudi Arabia and Russia, issued a statement saying it would add 432,000 barrels a day in June.
Despite the vow, there is widespread skepticism about how much OPEC+ will add, if anything. Many of its own members are struggling to meet their production quotas. And war, sanctions and government releases from strategic oil reserves are now wielding major influence on the world’s oil markets, leaving the pledges of OPEC+ far less important.
At this point, the group is flirting with irrelevance.
“OPEC+ has lost its reliability and credibility,” Kamel Al-Harami, an oil analyst, recently wrote in Arab Times, a Kuwaiti newspaper.
Once again the group said that “consensus on the outlook pointed to a balanced market.”
The brief communiqué also noted what it called “the effects of geopolitical factors,” an apparent reference to Russia’s assault in Ukraine and “issues relating to the pandemic.”
More important, though, the group seems to be approaching the ceiling of how much oil it can produce. Russia, for instance, is supposed to be pumping as much as Saudi Arabia but is, instead, seeing its output decline because of Western sanctions.
Several other members, including Angola and Nigeria, are also failing to meet their quotas. As a result, the output of OPEC+ is roughly flatlining.
Saudi Arabia and the United Arab Emirates, the two countries in the group that do have the ability to increase output, are benefiting from the situation. The Saudis are producing at relatively high levels of around 10.5 million barrels a day and are at the same time raking in massive amounts of cash from high prices.
“They are getting both high volumes and good prices,” said Bhushan Bahree, an analyst at S&P Global Commodity Insights, a research firm. “What is there to complain about?”
But they may not have much more oil to sell. Bahree estimates that the Saudis and the United Arab Emirates can increase by only about 1.8 million barrels a day, less than some forecasts of how much Russia’s output may decline.