Analysis: Within OPEC, opinions are growing that the recovery in oil could be prolonged

  • Oil rally to $100 not ruled out by OPEC sources
  • OPEC+ production shortfall seen as key driver
  • IEA chief urges OPEC+ to rethink policy to increase production

LONDON, Jan 18 (Reuters) – Oil’s recovery could drag on in the coming months as demand recovers and OPEC+’s limited ability to add supply and prices could break the 100 dollars a barrel, OPEC officials told Reuters.

Oil last traded at $100 a barrel in 2014, after averaging $110 a barrel in the previous two years. Rising shale production and competition among the world’s major oil producers in 2014 heralded a period of lower prices that appears to have come to an end as the global economy emerges from the pandemic.

Until recently, the prospect of a triple-digit comeback was seen as remote, but the market has recovered quickly from the unprecedented pandemic-driven drop in demand in 2020, with oil prices at one point becoming given negatives.

Join now for FREE unlimited access to


Brent crude is trading at around $87 a barrel, a seven-year high, after a 50% gain in 2021 as demand recovered and OPEC and its allies, known as OPEC+, n have only cautiously relaxed their supply restrictions.

Outages in Libya and elsewhere, along with a limited impact on demand for the Omicron coronavirus variant, fueled further gains in 2022.

The Organization of the Petroleum Exporting Countries does not publish oil price forecasts and has not had an official price target for years.

Officials and ministers from OPEC and Russian-led allies, a group known as OPEC+, are often reluctant to formally discuss the likely direction of prices or preferred price levels.

Reuters spoke privately with five OPEC officials, some of whom hold positions on the OPEC and OPEC+ committees, about the prospect of $100 oil. Of these, only one said it was unlikely while the others didn’t rule it out or said it might happen.

“There will be increasing pressure on oil prices for at least the next couple of months,” an OPEC source from a bigger producer said.

“Under these circumstances, the price of oil may be close to $100 but it will certainly not be very stable.”

OPEC+, formed in late 2016 to rid itself of a supply glut, in 2020 made record supply cuts of 10 million barrels per day (bpd), or 10% of global demand, which it gradually defuses since.

As demand recovers, OPEC+ aims to increase production by 400,000 bpd per month, but actual monthly production increases are falling as many producers cannot pump more and those who can are holding on to quotas.

“OPEC+ is struggling to produce at its target level as needed investments in the oil industry have not been made over the past two years, and the effect of Omicron on near-term oil demand has been subdued,” the source added, adding that these are the two major factors fueling the rally.

In November, the last full month available, OPEC+ production was 650,000 bpd below target, according to figures from the International Energy Agency (IEA).

Production 650,000 barrels per day below November 2021 target

In a rare oil price forecast from an OPEC+ leader, Russian President Vladimir Putin said in October that oil could hit $100. Read more

Goldman Sachs said Tuesday that Brent is poised to break above $100 later this year. Read more


OPEC+ capacity constraints are part of a larger trend, which has left the oil industry suffering from a lack of investment caused by the effects of COVID-19. Moreover, amid pressure to focus on cleaner fuels, European oil majors are reducing their investments in oil projects.

As a result, only a few large OPEC producers such as Saudi Arabia, the United Arab Emirates and Iraq have significant additional production capacity. Iran still holds 1 million bpd of unused capacity, but at least for now that is off the market due to US sanctions.

Another OPEC source said outages and robust demand were driving the rally and further gains are likely without another hit to demand, with a return to $100 not ruled out.

“The market is heating up,” he said. “I don’t know and I won’t speculate,” he added of the prospect of a rally to $100. “But if shortages continue to occur, prices will rise until COVID-19 again affects oil demand in the coming months.”


Rising prices allow OPEC and OPEC+ to rebuild revenues that collapsed in 2020. But some members of the group are not comfortable with such high levels.

“With these prices, it’s a demand risk,” another OPEC+ source said. “In my opinion, I have not been in favor of $85 and more for a long time. That’s a bit high for sustained demand growth.

He did not expect $100 oil as demand for jet fuel remains below pre-pandemic levels.

OPEC in November, shortly after Brent hit a three-year high of $86 and with natural gas, power and coal prices soaring, cited high energy costs for a review lower in its Q4 2021 demand forecast. Read more

OPEC+ has the capacity to produce more, located in a few countries. Getting that oil to market would likely require a decision to reallocate production from underperforming countries, but it would not be an easy political undertaking.

Most spare capacity is concentrated in Saudi Arabia, Iraq and the United Arab Emirates

Actual spare capacity is considered in industry circles to often be less than nameplate figures. Saudi Arabia’s spare oil capacity has not been tested to the maximum level.

OPEC+ met on January 4 and agreed to make another nominal increase of 400,000 bpd to its production target in February, suggesting that the gap between its actual and promised supply could widen further without the large producers do not compensate for the deficits.

So far, there is no indication that this is being considered, although on January 12 IEA Executive Director Fatih Birol urged OPEC+ to rethink: “There may be a need for countries to OPEC+…in light of strong demand growth as well as outages in some of the major players…(to) review their policies in the hope that they will continue to comfort markets with additional volumes “, did he declare.

Join now for FREE unlimited access to


Additional reporting by Noah Browning, editing by Simon Webb and Jason Neely

Our standards: The Thomson Reuters Trust Principles.


Comments are closed.