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OPEC struggles to pump at target even as oil reaches seven-year high

OPEC’s oil output in January has again undershot the rise planned under a deal with allies, a Reuters survey found on Monday, highlighting some producers’ struggle to pump more even as prices trade at a seven-year high.

The Organization of the Petroleum Exporting Countries (OPEC) pumped 28.01 million barrels per day (bpd) in January, the survey found, up 210,000 bpd from the previous month but short of the 254,000 bpd increase allowed under the supply deal.

OPEC and its allies, a group known as OPEC+, are gradually relaxing 2020’s output cuts as demand recovers after worst effects of the COVID-19 pandemic. OPEC+ meets on Wednesday and is expected to stick to previously agreed plans despite the surge in oil prices to a seven-year high near $92 a barrel.

“I would not expect a lot of deviation from the plan,” an OPEC+ delegate said of Wednesday’s meeting.

The OPEC+ agreement allowed for a 400,000 bpd production increase in January from all members, of which about 254,000 bpd is shared by the 10 OPEC members participating in the deal, OPEC documents show.

With output undershooting the planned increase, OPEC’s compliance with its pledged cuts increased to 132% in January, the survey found, up from 127% a month earlier.

OPEC+ is expected on Wednesday to proceed with another 400,000 bpd output increase in March, though two OPEC+ sources told Reuters the surge in prices might prompt the group to consider further steps.

The biggest rise in January came from Saudi Arabia, OPEC’s top producer, which boosted output largely as promised according to the agreement.

The second-largest was Nigeria, which boosted shipments of Forcados crude after a force majeure was lifted. Output is still in long-term decline and Nigerian compliance, at 253%, is among the largest in OPEC, the survey found.

The United Arab Emirates and Kuwait followed through on their higher quotas while Venezuela, which is exempt from the deal, pumped more as it halts a years-long decline in output.

Production fell or did not increase in Angola, Congo, Libya, Iraq and Iran, the survey found, in many cases owing to a lack of capacity to produce more or because of unplanned outages.

Output in Iraq edged down, the survey found. Industry sources said southern exports had been less than expected, although a brief stoppage of Iraq’s pipeline to Ceyhan in Turkey had not affected shipments.

“I suspect they offset the brief pipeline loss with stock draws,” said an industry source who tracks OPEC supply.

Iran pumped at stable levels in January. Prolonged talks on reviving its nuclear deal with world powers, which would allow higher oil exports, have yet to reach a deal.

The Reuters survey aims to track supply to the market and is based on shipping data provided by external sources, Refinitiv Eikon flows data, information from tanker trackers such as Petro-Logistics, as well as information provided by sources at oil companies, OPEC and consultants.
Source: Reuters (Additional reporting by Ahmad Ghaddar Editing by David Goodman )

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