Opec+ must fix its million-barrel supply gap, says IEA

[VIENNA] The International Energy Agency urged Opec and its allies to address a widening shortfall in their oil production as a volatile market sends crude prices rocketing toward US$100 a barrel.

While fuel consumption is bouncing back from the pandemic, the 23-nation alliance led by Saudi Arabia 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. The kingdom's energy minister will address the event later.

"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 10 Organization of Petroleum Exporting Countries members 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 in by tapping their remaining spare capacity, Riyadh has so far resisted the idea. Saudi Energy Minister Prince Abdulaziz Salman Al Saud will address the conference in a closed session later Wednesday.

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 their bases, western officials remain wary. Geopolitical risks could send crude prices to US$125 a barrel, according to Congo's Energy Minister Bruno Jean Itoua, who this year hold's Opec's rotating presidency.

He urged all Opec members to meet their production quotas, though financial and operational hurdles mean there's little that producers outside the group's core of Persian Gulf nations can do.

"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 becoming an increasingly pressing issue for President Joe Biden, whose attempts to rein in gasoline prices by deploying emergency oil stockpiles 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 conference. The US is keen to collaborate with consumers and producers to ensure supplies in these "tough times," he said. BLOOMBERG