Officials from OPEC, Russia and other oil producers agreed on Tuesday to continue their program of gradual monthly output increases in February, bolstering output by 400,000 barrels a day, but there are growing doubts about whether they can deliver on the additional barrels.
A persistent failure to step up production according to a schedule approved in July is helping to keep oil prices relatively high, even though a surge in coronavirus cases from the Omicron variant threatens to dampen economic activity and oil demand.
A few producers in the 23-member OPEC Plus group, including Saudi Arabia and Iraq, are increasing output handily, but others are lagging. A range of issues, including political strife and underinvestment in drilling, are holding them back.
The slow ramp up in production could lead to tension with the Biden administration, which wants the producers to pump more oil in an effort to lower gasoline prices in the United States. Gas prices, nationally at $3.28 a gallon, are now about one-third higher than they were a year ago, according to the Energy Information Administration, a government agency, and contributing to rising inflation.
What Saudi Arabia decides to do is crucial. The most logical route to meeting the scheduled increases in output would be for Saudi Arabia, which now has most of the world’s extra capacity, to agree to produce more than its quota.
At this point, the dynamics in the oil market are working for the benefit of producers like Saudi Arabia who have kept investing in their energy industries. Reflecting Saudi interests in avoiding overproduction, a statement released after Tuesday’s meeting mentioned “the critical importance of adhering to full conformity” on quotas. There was no sign of concern about producing less than those…