DUBAI, June 30 – Opec + is expected to discuss extending its agreement on reducing oil supply beyond April 2022, two Opec + sources announced today, after a panel set up by the group warned against “significant uncertainties” and the risk of a glut of oil next year.
The Organization of the Petroleum Exporting Countries, Russia and its allies, a group known as Opec +, have agreed to record production cuts of around 10 million barrels per day (bpd), from May 2020 and due to disappear by the end of April 2022..
The active management of OPEC + supply has responded to the collapse in demand as economies have closed to curb the spread of the coronavirus. In July, supply cuts still in effect will amount to 5.8 million bpd.
The Opec + panel, known as the Joint Technical Committee, said in a report that it expected a crude surplus by the end of 2022, based on multiple supply and demand scenarios.
The report indicates that the oil market would be in deficit in the short term, but that a glut was on the horizon once the OPEC + supply cuts were completed.
Russia’s position, which along with Saudi Arabia has been a driving force behind Opec + policy, was not immediately clear, so a final decision on a possible extension may not be made. taken at tomorrow’s Opec + meeting, one of the sources said.
Oil prices were trading above US $ 75 (RM 311) a barrel today, more than 40% higher than at the start of the year.
In a baseline scenario, inventories in the industrialized OECD economies would be 96 million barrels below the 2015-2019 average in the third quarter of 2021 and 125 million barrels below that average in the fourth quarter, according to the report. of the panel.
However, he said there would be a “significant increase” in inventories in 2022, bringing inventories to 181 million barrels above the five-year average by the end of next year, according to the report.
The baseline scenario adopts the assumptions of global oil demand growth and non-OPEC supply growth from OPEC’s June monthly report, with a preliminary forecast for 2022.
The panel said it still expected global oil demand to increase by six million bpd in 2021, but said “significant uncertainties” affecting demand included a divergence in the global economic recovery, an increase in demand. sovereign debt, uneven vaccine deployments and increasing cases of the Delta coronavirus variant.
Amrita Sen of consultancy Energy Aspect said Opec + “prefers to err on the side of caution” by forecasting a surplus in 2022, although she said they still expected demand to absorb production of Opec + and additional Iranian barrels next year.
OPEC observers said the group could leave output unchanged when ministers meet tomorrow or decide to increase output, perhaps by more than a million bpd or a more modest 0.5 million bpd.
Opec + sources said no unanimous decision or recommendation emerged from the panel’s consultations yesterday. – Reuters