Nearly two years ago, the world’s oil producers slammed on the
brakes and drastically cut production as the pandemic gripped the world’s
economies. The sharp pullback came with an implicit promise that as factories
reopened and planes returned to the air, the oil industry would revive, too,
gradually scaling up production to help economies return to pre-pandemic
health.
اضافة اعلان
It is not exactly turning out that way. Oil producers are
finding it harder than expected to ramp up output. Members of the cartel
OPEC
Plus, which agreed to cut output by about 10 million barrels a day in early
2020, are routinely falling well short of their rising monthly production
targets.
“In a lot of places, once output has been reduced, it is not
easy to bring it back,” said Richard Bronze, head of geopolitics at Energy
Aspects, a London-based research firm.
Production in the United States, the world’s largest oil
producer, has also been slow to recover from its 1-million-barrel-a-day plummet
in 2020, as companies and investors are wary of committing money amid climate
change concerns and volatile prices. The Energy Information Administration
forecasts that U.S. crude output in 2022, while rising, is likely to average
500,000 barrels a day below 2019 levels.
This global pattern of lagging production has helped push oil
prices to seven-year highs, stoking inflation, which has become a political
issue in the United States and elsewhere. Brent crude, the international
standard, is close to $84 a barrel, while West Texas Intermediate, the U.S.
benchmark, is selling for close to $82.
The gap between the target announced by OPEC Plus, which makes
up nearly half the world’s oil output, and actual output seems to be growing.
The International Energy Agency, a Paris-based forecasting group, pegged the
shortfall of the 19 OPEC Plus countries covered by quotas at 650,000 barrels a
day for November. Energy Aspects forecasts that the deficit will reach just
over 1 million barrels a day this month, or 1% of world supplies, and will
probably increase later in the year.
Forecasters are split on the oil outlook, with the International
Energy Agency saying in its most recent monthly report in December that
“much-needed relief for tight markets is on the way.” The Energy Information
Administration has forecast that oil prices will fall later this year.
Still, undershooting by countries like Nigeria and Angola has
become the norm as their oil industries struggle. A variety of factors are
causing production in some countries to fall short, including political
turmoil, outmoded regulatory regimes and pressures on international oil
companies to rethink their investments so as to bolster profits and reduce
carbon emissions. That shift could leave developing countries that depend on
oil income out in the cold.
“There are many basins that are simply of no interest anymore,”
said Gerald Kepes, president of Competitive Energy Strategies, a consulting
firm, referring to petroleum-bearing regions. In the eyes of international oil
companies, even a country like Nigeria, Africa’s largest producer, “doesn’t
make the cut,” he added.
Oil industry giants for decades courted Nigeria, investing
billions of dollars, but production has been slipping. In November, the country
was supposed to pump about 1.6 million barrels a day but missed that target by
more than 300,000 barrels a day, according to the International Energy Agency.
A welter of problems lie behind the shortfall. Nigeria’s
industry is plagued by damage to infrastructure caused by oil thieves and
others, problems that have worsened in recent months, according to the
industry.
International companies including Shell, which has long been a
major investor in Nigeria, are gradually reducing their presence in swampy
areas where their installations are vulnerable. They are being replaced by
smaller companies with less capital to spend, analysts say.
Without investment in drilling and technology, even the
best-endowed oil states will see their output dwindle. A case in point is
troubled Venezuela, where, amid neglect of the industry, production has shrunk
to relatively minuscule levels of less than 1 million barrels a day — less than
one-tenth of Saudi Arabia’s output — despite claims to have the world’s largest
reserves, about 300 billion barrels.
Kuwait, a wealthy Persian Gulf oil state, has seen its capacity
to produce decline about 18% over three years. Kamel al-Harami, a Kuwaiti
analyst, said that the domestic industry “does not have the experience and the
expertise to deal with old and aged oil fields” but that public opinion is
resistant to bringing in international companies.
Even Russia, which is roughly tied with Saudi Arabia as the
leading producer in OPEC Plus, is close to the short-term limit of what it can
produce, analysts say. Saudi Arabia, on the other hand, produces about 10% of
the oil on the world’s market and could produce more.
“Most OPEC producers are becoming capacity-constrained,” said
Bill Farren-Price, director of intelligence at Enverus, an energy market
research firm. “But Saudi Arabia is a different story. Its appetite for active
oil market management is undiminished,” he added.
Each month since the pandemic hit, OPEC Plus members have met to
set output quotas. Following a schedule agreed to in July, the group plans to
raise the overall output by 400,000 barrels a day each month, even though they
are missing the targets.
Stung by gasoline prices that have risen about 40% in the last
year, the White House has leaned on the Saudis and their allies to go faster in
opening up the throttle, but OPEC officials have so far been unwilling to lower
the quotas of those who are not able to hit targets and reassign them to other
countries.
“We have to keep what they are allotted,” Prince Abdulaziz bin
Salman, the Saudi oil minister, told journalists late last year. The
alternative, he added, would be a monthly debate over “who gets what.”
Analysts say Saudi officials do not want to unilaterally
increase output and risk busting up the arrangement with other producers that
gives them so much control. In addition, the lagging countries serve as a
stealthy way to trim the cartel’s output, helping the Saudis enjoy high prices
while increasing their own production.
And time may not be on the side of the Biden administration and
others urging more oil on the markets. As producers reach the limits of what
they can make in the coming months, “it is going to be less and less impactful
to demand that OPEC add more,” Bronze said.
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