"OPEC+ Production Increase Decision Unlikely to Lead to Actual Output Growth"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Hwang Yoon-joo] KB Securities analyzed that the OPEC+ production quota increase for July and August will not lead to an actual increase in production volume.

On the 4th, O Jae-young, a researcher at KB Securities, stated, "The recent OPEC+ decision to increase production in July and August is not a large enough increase to realistically stabilize the crude oil market."

Researcher Oh explained, "The additional production increase is 200,000 barrels per month (rising from the previous 430,000 barrels to 640,000 barrels), which is significantly lower than the expected reduction in Russian crude oil supply."

He analyzed, "OPEC's production has been unable to keep up with the continuously increasing production quotas, and since the Russia-Ukraine war in March, the gap between quotas and actual production volume has further widened."

Researcher Oh pointed out, "Despite OPEC+ increasing production by 400,000 barrels per month, OPEC's total production in March decreased compared to February (-40 million barrels/day). Production increased again in April but only by 153,000 barrels compared to the previous month."

He evaluated, "As of April, the total production of the 10 OPEC countries (those subject to quotas) was 24.46 million barrels per day, falling short of the total quota of 25.31 million barrels per day by 850,000 barrels per day."

Researcher Oh predicted, "Among the current production quota increases, only Saudi Arabia, UAE, Iraq, and Kuwait can actually increase production, and their quota increase amounts to 100,000 barrels per day. The actual increase in production will be too small to significantly lower international oil prices."

He added, "Among Iran, Venezuela, and Libya, which are not subject to quota restrictions, Libya's production decreased by 160,000 barrels in April compared to the previous month due to civil war, and the expansion of Iran's crude oil supply, which was expected to increase by more than 500,000 barrels per day by the end of the year due to delays in nuclear agreement negotiations, has also become uncertain."

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