Fri, Sep 03, 2021 page10

• OPEC to increase oil supply by 400,000 barrels per day

  • Bloomberg
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  OPEC and its allies have agreed to stick to their plan for gradual monthly oil production increases after a brief videoconference.

  Ministers ratified the 400,000 barrel-a-day supply increase scheduled for next month after less than an hour of talks, one of the quickest meetings in recent memory and a stark contrast to drawn out negotiations in July.

  While conditions might appear favorable for OPEC, there are uncertainties on the horizon. Even as demand recovers, it has been buffeted by the emergence of new SARS-CoV-2 variants. The question of whether Iran and the US will strike a deal to lift sanctions on the Islamic Republic’s oil exports — currently looking less likely — also hangs over the market.

  

  Oil plants near Damman, Saudi Arabia, are pictured on Feb. 11, 2018.

  Photo: AFP / HO / ARAMCO

  West Texas Intermediate was 0.4 percent lower after closing little changed on Wednesday.

  OPEC and its allies including Russia are in the process of rolling back the unprecedented output cuts implemented at the depths of the COVID-19 crisis last year.

  About 45 percent of the idle supply has already been revived, and the group in July laid out a plan for gradually returning the remainder through September next year.

  With crude prices mostly recovered from a slump in the middle of last month and the supply outlook relatively tight for the rest of the year, the 23-nation coalition had little reason to change the established schedule of gradual monthly supply increases, despite a request from the White House to revive output faster.

  There had been some doubts about the plan when oil markets wobbled over the summer as the resurgent virus threatened demand.

  However, fuel use proved resilient, with total oil products supplied in the US rising to a record late last month.

  “While the effects of the Covid-19 pandemic continue to cast some uncertainty, market fundamentals have strengthened and OECD [Organisation for Economic Co-operation and Development] stocks continue to fall as the recovery accelerates,” OPEC+ said in a statement.

  The group is to meet again on Oct. 4.

  Data presented to ministers reveal a fresh challenge for Saudi Arabia and its partners next year.

  Markets were projected to tip back into surplus next year, with an average oversupply of 1.6 million barrels a day.

  However, the projections assume that the group would restore all of the almost 6 million barrels a day of output that remains offline — an unlikely feat as many countries might struggle to reach their full targets.

  The amount of crude production that OPEC+ theoretically holds offline is based on questionable figures. Russia has an inflated baseline that is significantly higher than pre-COVID-19 pandemic output. Some other members have outdated capacity numbers, with countries including Angola and Nigeria already struggling to make the supply increases permitted under the deal.
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