The International Energy Agency (IEA) urged the Organisation of the Petroleum Exporting Countries (Opec) and its allies to address a widening shortfall in their oil production as a volatile market sends crude prices rocketing toward $100 a barrel.
While fuel consumption is bouncing back from the pandemic, the 23-nation alliance led by Saudi Arabia and Russia is struggling to restore output it halted. Members need to fix the issue as the supply gap versus their target spirals toward 1 million barrels a day, IEA Executive Director Fatih Birol told a conference in Riyadh via video-link.
“There is a significant difference between the targets that Opec+ countries set in terms of their production levels and what is produced today,” Birol told the meeting hosted by the International Energy Forum. “Therefore it is important that Opec+ countries narrow this gap” and “hopefully provide more volumes to the market in order to reduce volatility.”
Plagued by under-investment and disruptions, many Opec+ members aren’t able to bring back the barrels they’ve pledged. The resulting surge in oil prices is feeding an inflationary spike that threatens to derail the global economic recovery, and inflicting a cost-of-living crisis on millions.
The ten members of Opec that are subject to quotas pumped 23.9-million barrels a day in January, according to IEA data, compared with a target of 24.6-million.
While the alliance’s Middle East heavyweights Saudi Arabia, the United Arab Emirates and Iraq could fill the gap by tapping their remaining spare capacity, Riyadh has so far resisted the idea. Saudi Energy Minister Prince Abdulaziz bin Salman also addressed the conference in session that was closed to media.
High prices are hurting many households and could become a drag on economic growth, according to Birol.
The situation could become more critical if the standoff between Russia and the West over Ukraine escalates. While Moscow has said some of its troops are returning to their bases, Western officials remain wary. Geopolitical risks could send crude prices to $125 a barrel, according to the Republic of Congo’s energy minister, Bruno Jean Itoua, who this year holds Opec’s rotating presidency.
He urged all Opec members to meet their production quotas.
“We are fighting to respect our commitment,” Itoua said. “We want all the Opec+ members to do it.”
With mid-term elections approaching in the US, energy costs are an increasingly pressing issue for President Joe Biden, whose attempts to rein in gasoline prices by deploying emergency oil stockpiles have met with little success.
The geopolitical dangers are a reminder “that we’re still in a place where energy security cannot be taken for granted,” the State Department’s senior adviser for energy security, Amos Hochstein, told the Riyadh conference, which he attended in person. The US is keen to collaborate with consumers and producers to ensure supplies in these “tough times,” he said.