The prevailing belief in oil markets over the past three years has been that any supply shortfalls could be swiftly met by OPEC+, the group of producers and allied nations including Russia, after they jointly cut output in 2022, ultimately slashing production by as much as 5.85 million bpd, or around 5.5% of global demand.
This resulted in an increase in global "spare capacity," what the International Energy Agency defines as "capacity levels that can be reached within 90 days and sustained for an extended period." In other words, the amount of additional supply that could be quickly and sustainably injected into global markets.
The existence of this buffer likely helped mitigate spikes in oil prices during the Israel-Iran war last June and has probably tamped down volatility as the war in Ukraine has escalated.
If OPEC+ could ramp up production rapidly, markets had no reason to panic in the face of any potential supply disruption.
But that shock absorber has rapidly thinned since OPEC+'s core eight members started unwinding those cuts in April.
The group on Sunday agreed to increase production by a further 137,000 bpd in November, which would bring total targeted production increases since April to more than 2.7 million bpd.
As the group increases output, its spare capacity naturally diminishes. And by some estimates, that buffer might already be smaller than previously assumed.
OPEC+'s estimated total spare capacity stood at 4.1 million bpd as of August, with almost 60% held by Saudi Arabia and another 20% by the United Arab Emirates, according to data from the IEA.
That might sound like a lot. But the challenges countries have faced in ramping up production since April suggest that some members are finding it hard to rapidly and sustainably tap this supposed excess capacity.
OPEC+ delivered between April and August only 75% of production increases on average, according to a Reuters analysis, undershooting the 1.92 million bpd targeted production increase by around 500,000 bpd.
This indicates that the level of spare capacity may have declined in the past three years, likely because oil wells that are shut for extended periods take significant time and investment to revive – potentially more than expected.
Of course, part of the shortfall since April was due to members like Iraq deliberately scaling back production to compensate for past excesses. Additionally, OPEC+ actually exceeded its target by 760,000 bpd in August, primarily due to Iraq's overproduction, according to IEA data.
However, moving forward, most producers appear to have limited scope to ramp up production sustainably.
Kazakhstan, which far exceeded its production quota at the start of the year, today has little to no room to raise output.
Algeria and Oman also appear to be producing at full capacity.
Russia, whose oil and gas industry faces heavy Western sanctions, has struggled to raise output, and Ukrainian drone attacks on its infrastructure in recent months risk further reducing its output.
0 comentários:
Postar um comentário