Russian oil output will fall sharply, removing the rationale for the OPEC+ agreement
That’s what analysts at Standard Chartered expect, according to a new report from the company sent to Rigzone late Tuesday, which included a graph outlining differences between forecasts for Russian oil production.
The graph in the report highlighted that the OPEC Secretariat is projecting that Russian production will rise from around 11.5 million barrels per day (MMbpd) in January 2022 to just under 12MMbpd around summer of this year. The graph also shows that the U.S. Energy Information Administration is forecasting that Russian production will drop from between 11MMbpd and 11.5MMbpd to between 10.5MMbpd and 11MMbpd this year.
Conversely, the graph highlights that the International Energy Agency’s forecast plummets from around 11.5MMbpd to around the 8.5MMbpd mark this year. Standard Chartered’s projection sees Russian production dropping from between 10.5MMbpd and 11MMbpd to under 8.5MMbpd this year, before rising above the 8.5MMbpd mark towards the end of the year, then dropping under it again as 2024 approaches.
“If ministers accept the lower two lines [in the graph – i.e. the IEA and Standard Chartered forecasts] as a base case we think they will conclude that there are few advantages, and multiple disadvantages, in staying within the current OPEC+ agreement,” Standard Chartered’s analysts stated in the report.
The analysts noted in the report that they think Russian oil exports to Europe could be cut to zero without medium-term price overheating, but only if second quarter dislocations are eased by large strategic stock releases and if OPEC production increases significantly.
“The prospects for the latter depend on whether there is a deal in the nuclear negotiations with Iran in Vienna and whether key OPEC members (particularly Saudi Arabia, UAE, Kuwait and Iraq) are nimble enough in their policy thinking to move away from the OPEC+ agreement,” the analysts said in the report.
OPEC+ is currently scheduled to meet on March 31 via videoconference for the 27th OPEC and non-OPEC Ministerial Meeting. The group’s previous meeting on March 2 reconfirmed the decision to adjust the group’s monthly overall production up by 400,000 barrel per day in April.
In a market note sent to Rigzone yesterday, Rystad Energy’s senior oil market analyst, Louise Dickson, noted that the oil bulls had again gained an upper leg in the market in anticipation of U.S. President Joe Biden’s visit to Brussels and a potential announcement of the EU joining the embargo on Russian oil imports. Dickson warned, however, that Europe has not firmly committed to cutting off its more than 2.1MMbpd of oil originating from Russian pipelines and ports.
