BAKU, Azerbaijan, Jan.22
By Leman Zeynalova – Trend:
OPEC+ focus will switch from propping up prices during Covid-19 to managing longer-term uncertainty, Trend reports with reference to the Energy Intelligence 2022 Outlook.
The energy information company notes that the transition will make supply and demand harder to match, keeping markets volatile. OPEC+ will need to stay flexible.
“Internal dynamics in 2022 will be shaped by a growing gap between production leaders and laggards. April’s revision of quota baselines for five members (Saudi Arabia, UAE, Russia, Iraq and Kuwait) will test cohesion and flexibility. If prices are high, the group may reassign volumes from those struggling to produce (Nigeria, Angola and Malaysia). If this is too tricky, an informal solution could see tacit overproduction by those with spare capacity,” reads the report.
The company believes that expiry of existing production cuts – in September or earlier – should evolve into some form of continued cooperation and flexible market management.
“Saudi Arabia is committed to keeping the group together, using consensus and compromise as needed. Russia would prefer a looser organization, but is unlikely to rock the boat. The UAE sees benefits of staying, as long as it can deploy expanding capacity. Producers will push back against an accelerated transition, leveraging heated markets. They must be careful not to provoke consumers and accelerate the pace instead. Matching supply to demand will get harder as the transition advances and deters long-term investment. Flexible market management will be needed for the foreseeable future,” says the report.
Follow the author on Twitter: @Lyaman_Zeyn