Oil cartel Opec tightened its outlook for global oil markets, forecasting that inventories will fall sharply over the rest of 2021 if the group and its allies do not raise production further.
The group, assessing the market before ministers meet on Tuesday, expects that the surplus in oil inventories will be mostly gone by the end of June, according to a document seen by Bloomberg. Stockpiles will decline by at least 2-million barrels a day from September through December.
The Opec and its partners are restoring some of the supply they cut after the coronavirus pandemic hammered businesses and demand for fuel. The curbs have helped crude rebound around 35% in 2020 to almost $70 a barrel.
The 23-nation group — led by Saudi Arabia and Russia — is expected to rubber-stamp a production increase scheduled for July, completing the return of just over 2-million barrels a day of halted supply. They’re also expected to have preliminary discussions on what to do after that.
The producers will still have substantial spare capacity once the current increase is complete, amounting to almost 6% of world supply. According to the JTC’s report, there’s considerable scope for the coalition to raise output later in 2021.
Global oil inventories will fall at an average of 1.4-million barrels a day in 2021 if Opec+ holds steady after July, according to the document, presented to the joint technical committee (JTC) on Monday. That’s a steeper rate than the figure of 1.2-million projected in April. The stock draws will gather pace from September and reach 2.6-million barrels each day in November.
The massive glut that piled up when demand crashed during the pandemic will be mostly gone by the end of next month, it showed. By December, inventories in developed nations will stand 109-million barrels below their average for the 2015-2019 period.
A major uncertainty for the alliance, emphasised by Opec secretary-general Mohammad Barkindo at the JTC, is exports from member nation Iran. Tehran is engaged in negotiations with world powers that could revive a 2015 nuclear accord and ease U.S. sanctions on its exports. That could lead to a flood of Iranian barrels on world markets.
A successful deal would allow the Islamic Republic to fill in some of the looming supply deficit projected by the JTC.
Bloomberg News. More stories like this are available on bloomberg.com