OPEC+ is mulling over a further relaxation in its oil production cut agreement beginning August, Reuters has reported, citing unnamed sources in the know. The discussions are ongoing, the Reuters sources said, focusing on how much oil the cartel will bring back.
OPEC+ started relaxing its unprecedented production cuts of 7.7 million bpd at the beginning of this year, gradually adding 2.1 million bpd to the global supply between May and July in response to a faster than expected demand recovery.
"It is highly possible to increase gradually from August," one of the Reuters sources said.
Separately, Bloomberg cited Russian officials as saying that Moscow was considering proposing a further relaxation of the cuts from August as Brent crude tops $75 per barrel. The position of Saudi Arabia, the de facto leader of OPEC and co-leader of the production cut agreement along with Russia, remains unknown.
OPEC+ met earlier this month to discuss the agreement but did not make any changes to it, keeping its oil demand growth forecast for the year unchanged.
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"The projections for oil are largely unchanged from our last meeting, with demand expected to grow by 6 mb/d to around 96.5 mb/d on average for the year, an increase of 6.6%. As with the economy, the market outlook for later this year looks especially promising," OPEC Secretary General Mohammad Barkindo said at the JMMC meeting in early June, which preceded the full OPEC+ meeting.
The International Energy Agency urged OPEC+ to open the taps as prices soared to three-year highs. At the same time, Goldman Sachs noted recently that the oil market is still in deficit, to the tune of 3 million bpd, despite the gradual return of production so far this year.
The addition of more barrels to global supply may become even more urgent: with a newly elected hardliner at the helm in Iran, some worry the nuclear talks with the United States may stall, delaying the return of Iranian oil to global markets.
By Irina Slav for Oilprice.com
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Russia whose economy could live with an oil price of $40 would wait a bit before demanding a further relaxation of the production cuts so as not to upset Saudi Arabia. Anyway, Brent will soon touch $80.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London