Opec+ sticks to script with 432,000 b/d May quota hike

The Opec+ coalition has agreed a 432,000 b/d increase in its combined crude output target for May, delegates said, resisting pressure from outside the group to raise production at a faster rate to help ease supply concerns stemming from the Russia-Ukraine conflict.

May's quota hike is slightly larger than the 400,000 b/d monthly increases implemented since last summer. This is because five members of the group will have higher baseline production levels from May.

Today's Opec+ ministerial meeting comes against a backdrop of increased political pressure on the group to rethink its approach in light of the risk to Russian supply from international sanctions. Earlier this month, the IEA said at least 3mn b/d of Russian oil output could be forced offline as early as April. Leading trading firms Vitol, Mercuria, Trafigura and Gunvor project a similar-sized decline, of 2mn-3mn b/d.

The US has already banned Russian oil imports, and the UK has pledged to phase them out by the end of the year. More recently, Poland said it plans to stop importing Russian oil by the end of 2022 and called on other EU countries to follow suit.

Opec+ ministers have repeatedly defended their output policy, arguing that the run-up in oil prices to over $100/bl is driven by geopolitics, not an actual shortage of oil. Since August last year, the group has stuck to a schedule of monthly increases of 400,000 b/d. An upward revision to the production baselines of Iraq, Kuwait, Russia, Saudi Arabia and the UAE means the monthly hike rises to 432,000 b/d in May.

Even if the group had decided to accelerate its production increases, its ability to do so would be limited. Several members are already struggling to meet their assigned quotas owing to dwindling capacity and underinvestment. Argus estimates that the gap between the coalition's target and its delivered output reached 890,000 b/d in February.

Saudi Arabia and the UAE hold the lion's share of remaining Opec+ spare capacity. Russia was running out of spare capacity even before sanctions threatened its supply — its March output target was just above its 10.3mn b/d of crude capacity, as estimated by Argus .

Russia is the third Opec+ member subject to sanctions, following Iran and Venezuela. The group has always attempted to keep politics out of its output policy decisions, and there are no signs that the Russia-Ukraine conflict will prompt a change in approach .

"We have one mission, which is stabilising the market," UAE energy minister Suhail al-Mazrouei said this week. "We cannot be politicising or bringing politics into the organisation and having that debate. There are other entities, or other ministries that are in charge of that."

By Ruxandra Iordache and Nader Itayim

Opec+ quotas mn b/d May April Saudi Arabia 10.549 10.436 Iraq 4.461 4.414 Kuwait 2.694 2.666 UAE 3.040 3.006 Algeria 1.013 1.002 Nigeria 1.753 1.735 Angola 1.465 1.450 Congo (Brazzaville) 0.312 0.309 Gabon 0.179 0.177 Equatorial Guinea 0.122 0.121 Opec total* 25.588 25.316 Russia 10.549 10.436 Oman 0.846 0.837 Azerbaijan 0.688 0.682 Kazakhstan 1.638 1.621 Malaysia 0.571 0.565 Bahrain 0.197 0.195 Brunei 0.098 0.097 Sudan 0.072 0.072 South Sudan 0.124 0.123 Non-Opec total** 14.783 14.628 Opec+ total 40.371 39.944 *Libya, Iran, Venezuela exempt **excludes Mexico

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