The OPEC+ group now expects the oil market to show a deficit of just 300,000 barrels per day (bpd) in the fourth quarter, down from initial expectations of a 1.1-million-bpd deficit, delegates told Bloomberg.
The alliance’s Joint Technical Committee (JTC) significantly downgraded the expectations of a market deficit at their meeting on Thursday after reviewing the latest data on global oil demand, Bloomberg’s sources added.
The technical panel monitors the situation on the market and meets ahead of every ministerial meeting of OPEC+. Ministers are scheduled to meet on November 4 to discuss how to proceed with the easing of the collective production cuts.
The lower expected deficit would justify the continued cautious approach of the group in adding supply to the market. Since August, OPEC+ has been easing the cuts by 400,000 bpd in each month through November, despite calls from oil-consuming nations—including the United States—to boost supply and tame the oil price rally.
The downgrade to the expected deficit would also justify the position of OPEC’s top producer and the world’s largest exporter that market participants should look beyond the fourth quarter of this year.
OPEC+ needs to remain cautious with its approach to oil production adjustments despite rising prices, Saudi Energy Minister, Prince Abdulaziz bin Salman, told Bloomberg in an interview earlier this week.
The Saudi minister noted that higher production is only justifiable when there is a clear purpose for it, which, according to him, was now absent as utilities switching from gas or coal to oil were doing on a very limited scale.
The energy minister also said he expected a significant increase in combined OPEC+ oil supply by the end of next year, even without the hypothetical return of Venezuela or Iran to international markets.
“We don’t take things for granted,” he told Bloomberg. “We still have Covid, there are still lockdowns,” and jet fuel supply remains constricted. “So, we’re not yet out of the box and we’re not out of the realm of Covid.”
By Tsvetana Paraskova for Oilprice.com
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