While the unrest in the Middle East lends an element of risk to the oil markets, helping to put a floor under prices, OPEC is manoeuvring to keep the status quo.
This week, OPEC’s JMMC did not recommend any changes to the group’s oil output targets during the quarter – as most had predicted. Second, Saudi Arabia announced that it was cancelling its plans to boost capacity to 13 million bpd.
This could be interpreted in any number of ways, whether that’s because oil demand isn’t what it needs to be to utilize the additional production, or because non-OPEC entities have increased production nearly as quickly as OPEC was cutting it.
Has Saudi Arabia–and OPEC–been suffering from a case of magical thinking over the last couple of years while the United States quietly ramped up crude production from 11 million bpd in January 2021 to the current 13 million bpd?
Is OPEC ceding market share to U.S. shale yet again in the group’s struggle to maintain a balanced market?
Back in January 2021, OPEC was producing 25.5 million bpd, with Saudi Arabia producing 9.1 million bd. And while the United States increased its rate of production by 2 million bpd since that time, OPEC has boosted its production to 26.7 million bpd–a 1.2 million bpd rise. This suggests that the group has indeed lost market share to the United States. The situation looks even worse for Saudi Arabia.
