The OPEC+ alliance is widely expected to decide next week to further ease the collective production cuts, but the additional supply from August will likely still be less than the supply deficit on the market, analysts and traders told Bloomberg in a survey.
The ministers of OPEC+ meet on July 1 to decide how to proceed with the management of oil supply to the market in the first meeting since April, which analysts expect with more noise than in the past three months when the group was meeting just to confirm plans it had made for easing the cuts between May and July.
The alliance will have returned a total of 2.1 million barrels per day (bpd) on the market by the end of July. Now the market awaits the next move from OPEC+. Reports have already started to emerge that the group is considering further easing of the cuts from August.
Thirteen out of 15 analysts Bloomberg surveyed expect OPEC+ to add more barrels, but their average forecast is for additional supply of around 510,000 bpd from August. This is just a quarter of the expected supply deficit in August, according to estimates from OPEC+ itself, Bloomberg notes.
Many analysts believe that the group will not rush the easing with a large number, and the Saudi Energy Minister, Prince Abdulaziz bin Salman, has signaled continued caution about bringing too much supply too early.
“There will always be a good amount of supply to meet demand, but we’ll have to see demand before you see supply,” Abdulaziz bin Salman said at a forum in Russia earlier this month.
The minister, however, is on a mission to wrong-foot short sellers and has been warning traders for months not to bet against oil. This year, OPEC+ surprised market expectations two times, so no one is ruling out another surprise next week.
Yet, the most recent comments from Abdulaziz bin Salman suggest that easing of the cuts is on the way.
“We have also a role in taming and containing inflation, by making sure that this market doesn’t get out of hand,” he said at a conference, carried by Bloomberg.
Commenting on the OPEC+ noise, Saxo Bank said on Thursday:
“With US shale production showing no sign of a revival, the group can through its decision send a signal whether it is seeking higher prices or stability at current levels.”
By Tsvetana Paraskova from Oilprice.com
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