OPEC+ Sees Tighter Oil Market Until May 2022

Emmanuel Addeh in Abuja with agency report

The Organisation of Petroleum Exporting Countries (OPEC) and its allies expect the oil market to be in deficit at least until the end of 2021 and stocks to stay relatively low until May 2022, sources told Reuters yesterday.

OPEC+ led by Russia meets today to set policy, during which it is likely to roll over existing policies despite pressure from the United States to pump more oil.

Still, the forecast for a tighter market strengthens the case for a speedier output increases by OPEC+ as benchmark Brent oil prices traded close to $73 per barrel – not far off their multi-year highs on Tuesday.

The comments from sources came as experts from the OPEC+ Joint Technical Committee (JTC) presented an updated report on the state of the oil markets in 2021-2022.

According to the sources, the report, which has not been made public, forecasts a 0.9 million barrel per day (bpd) deficit this year as global demand recovers from the coronavirus pandemic while OPEC+ gradually brings back production.

Initially, the report had seen a surplus of 2.5 million bpd building in 2022 but it was later revised to a smaller surplus of 1.6 million bpd, according to the sources.

As a result, commercial oil inventories will remain below their 2015-2019 average until May 2022 as apposed to the initial forecast for January 2022, the JTC presentation showed, according to the sources.

The JTC had expected global oil demand to grow by 5.95 million bpd this year and by 3.28 million bpd next year. It was not clear if those figures have been revised up in the latest report.

The JTC meeting on Tuesday took stock of the oil market and made recommendation to the ministerial meeting scheduled for Wednesday afternoon.

The ministers of the OPEC+ group are set to discuss market developments and possibly consider whether the planned monthly increases in production by 400,000 bpd are warranted, in light of signs that global oil demand recovery could falter with the spike in the Delta variant coronavirus cases.

Most analysts, as well as OPEC+ sources, signal that the group will decide on Wednesday to proceed with the easing of the cuts. OPEC also sees growing demand despite the COVID resurgence, according to its latest Monthly Oil Market Report (MOMR).

Global oil demand is expected to average 96.6 million bpd this year and exceed 100 million bpd in the second half of 2022, OPEC said in the report on August 12, keeping its estimates from a month ago unchanged despite the COVID resurgence in major economies.