With

Olivia Frieser, Global Head of Markets 360

David Martin, Head of Commodities Desk Strategy

BNP Paribas | Global Markets (Recorded 3 February 2022)     

OPEC+ concluded its monthly meeting on Wednesday. 

On paper, the rapid endorsement of a further 400 kbd in March OPEC output is exactly what the market requires, in our opinion, given the continued recovery in demand.  

However, in reality OPEC+ continues to under-deliver against its agreement, with initial January estimates point to as little as an additional 120-150 kbd of production in January versus December.

Unless OPEC+ can accelerate production growth, then in our opinion, the cumulative under-delivery versus plan – which the IEA assessed at near 800 kbd in December is set to accelerate in the coming months.
 

Thus, even as OPEC’s own assessment of the market points to continued surpluses in the coming quarters, it appears predicated on a continuous increase in OPEC+ supply that seems unachievable. 

The reality is that the market participants may need to prepare themselves for continued draws especially in H2 2022 and 2023.  

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