The 23-nation network is due to meet again in June, but what state their union will be in by that point is highly uncertain
OPEC’s crude production rose last month, when the cartel’s pact to manage global markets broken down and group leader Saudi Arabia geared up for an all-out price war.
Oil prices have plunged by more than 50% since nations from the Organization of Petroleum Exporting Countries met in early March, as lockdowns around the world to combat the deadly coronavirus have brought transport and economic activity to a halt.
At that gathering, the Saudis clashed with Russia over how to deal with collapsing demand, and the alliance they’d led, between OPEC producers and non-members, imploded. Riyadh threatened it would soon flood world markets, and a Bloomberg survey shows they wasted little time.
The kingdom boosted production by 290,000 barrels a day to a one-year high of about 10 million a day, according to the survey. It’s based on information from officials, ship-tracking data and estimates from consultants including Rystad Energy AS and JBC Energy GmbH. OPEC’s overall output rose by 150,000 barrels a day to just over 28 million a day.
Yet the surge seen in March is only a glimpse of what’s to come. State-run Saudi Aramco is now supplying record volumes of more than 12 million barrels a day, while other Gulf producers, such as the United Arab Emirates and Iraq, have also pledged to ramp up to unprecedented levels.
The ensuing glut of crude, coming as demand plunges more than 20%, because of lockdowns aimed at curbing the spread of coronavirus, threatens to exhaust the world’s storage capacity in a matter of months.
It’s also got the US worried, with President Donald Trump saying he’ll intervene to find a compromise between Riyadh and Moscow, and avert a sustained price rout from devastating America’s shale-oil industry. Yet the kingdom is apparently resisting any mediation, and it’s unclear whether rapprochement could achieve much given the magnitude of the oversupply.
The production increase from the Saudis in March more than offset losses in three of OPEC’s most troubled members - Iran, Libya and Venezuela - who have suffered ongoing declines amid a mixture of political crises, economic meltdown and US sanctions.
The widening divide between OPEC’s haves and have-nots is heightening tensions. A bid led by member nation Algeria to revive consultations foundered amid opposition from Saudi Arabia and other Gulf exporters.
OPEC and its allies - a 23-nation network that pumps about half the world’s oil - is due to meet again in June, but what state their union will be in by that point is highly uncertain.