BAKU, Azerbaijan, June 7. As OPEC+ decided to boost its production during the last ministerial meeting on June 2, it is expected that the current trend will continue, although, this does little to bringing prices down, Trend reports via Country Risk & Industry Research from Fitch Solutions.
OPEC+ has raised its July output target by 50 percent - from 0,411 million barrels per day to 0,648 million barrels per day. As Fitch said, this may pave way for further increase in production in the upcoming months.
However, many expected a more dynamic move from OPEC+ to control high prices, and to substitute for the loss of Russia’s output, or even to banish Russia from the group.
Meanwhile, “after an initial decline after the announcement was made, front month Brent prices have since climbed higher to above $120 per barrel. But with prices remaining nearly 18 percent higher than the intra-month low of $102 per barrel set in early May, crude importers are likely to continue demanding price relief through more production,” the report said.
As Fitch expects, the production speedup will continue in August, which will support the comeback to the full production plans.
“From our analysis of past compliance, the OPEC 10 share of the production increases of 0.411 million barrels per day (about 60 percent of the OPEC+ total of 0.648 million barrels per day) is likely to only yield an increase of 0.353 million barrels per day from the five key members who have steadily increased output over 2022,” Fitch added.
The increase in production targets above the initial forecasts is a recognition by OPEC+ of a shortage of supply in the market, which was not previously recognized.
"The accelerated cut also signals a potential shift in OPEC production in the short term after August to help balance markets, as the group calls higher oil prices a growing risk to global economic stability along with other inflationary pressures," the report noted.
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