OPEC+ Sees Oil Markets Tightening This Fall

Despite the COVID resurgence, the oil market will become increasingly tight this year, OPEC+ estimates show, but as the group continues to ease the production cuts into next year, the balance will tip into surplus again in 2022.

Global inventories are set to dwindle by 825,000 barrels per day (bpd) over the next four months, according to an OPEC+ estimate expected to be presented at the alliance’s Joint Technical Committee (JTC) meeting on Tuesday, Bloomberg reports, citing a source familiar with the data.

The JTC meeting today takes stock of the oil market and makes recommendations—if any—to the ministerial meeting scheduled for Wednesday afternoon Vienna time.

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, including China and the United States.

OPEC+ may find next year more challenging to manage the oil market because supply is forecast to exceed demand by an average of 2.5 million bpd if the group continues easing the cuts as planned and unwind all of the supply it has been holding from the market. The surplus would lead to global inventories rising by 913 million barrels in 2022, according to Bloomberg’s source familiar with the data presented at the JTC meeting.