• 6 days Retail On Pace For Most Bankruptcies And Store Closures Ever In One Year: BDO
  • 10 minutes America Could Go Fully Electric Right Now
  • 4 hours Majors Oil COs diversify into Renewables ? What synergies forget have with Solar Panels and Wind Tirbines ? None !
  • 9 hours OP Kennedy article : "Trump blasts Biden Fracking Plan . . . "
  • 13 hours America's Frontline Doctors - Safely Start Living Again!
  • 19 hours France Sees 10.6% EV Market Share In September — 4× Growth Year On Year
  • 19 hours Conoco Pledges ‘Net-Zero’ Emissions in Break With U.S. Rivals
  • 15 hours Vote Biden for Higher Oil Prices
  • 2 days Something wicked this way comes
  • 2 days Permian in for Prosperous and Bright Future
  • 14 hours Tesla Model 3 Is September's Top Selling Car of All Vehicles in Switzerland
  • 2 hours "COVID Kills Another Oil Rally" by Tom Kool 10/16/2020
  • 9 hours Clean Energy Is Canceling Gas Plants
  • 19 hours TX NATGAS flaring
  • 24 hours GPOR - Gulfport Oil - Why?
  • 1 day covid. stop the carriers and thus stop the virus.
  • 2 days A sneak peak into the US election
  • 3 days California’s Electric Vehicle Dream Has A Major Problem: No
Will OPEC+ Decide To Extend Oil Output Cuts?

Will OPEC+ Decide To Extend Oil Output Cuts?

Oil markets remained strong during…

Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

More Info

Premium Content

OPEC In Trouble As Oil Outlook Worsens

Just when they thought they had rebalanced the oil market, OPEC members were served an unpleasant surprise from exempted fellow Libya. The country’s warring factions reached a ceasefire, and some long-shuttered oil ports have been reopened, along with the fields that feed them. By the end of the month, the National Oil Corporation plans to boost the average daily output of the nation from less than 100,000 bpd to 260,000 bpd. Meanwhile, OPEC+ has relaxed its production cuts by 2 million bpd.  The market, according to Mercuria chief executive Marco Dunand, cannot handle this.

In an interview for Bloomberg, Dunand said demand was still weaker than previously expected, and any additional oil flowing into markets would fail to be absorbed. This means a looming build in floating storage as this month, global inventories rose by between 500,000 bpd and 1 million bpd—and that’s excluding the Libyan restart— while drawdowns over the final quarter were seen at 1 million bpd.

In his bearish outlook for the immediate term, Mercuria’s head is in sync with the head of another commodity trading major, Trafigura. The third super trader, however, is surprisingly optimistic. Also in an interview with Bloomberg, Vitol’s chief executive said earlier this month he expected global crude oil inventories to shrink considerably by the end of the year. While both the heads of Trafigura and Mercuria expect stocks to build first before starting to decline, Vitol’s chief said he expected a drawdown of some 250-300 million barrels by the end of the year.

Reports emerged earlier this month that commodity traders—including the Big Three—were chartering more tankers to store crude oil offshore, sparking concern we could see something like a repeat of this spring when hundreds of millions of barrels of unsellable oil had to be dumped on tankers because onshore storage was full. After the lockdowns ended, demand began improving. This moderate demand boost, however, fell short of pretty much all expectations.

Related: Natural Gas Prices Explode On Stronger Demand

One particularly worrying trend is the slow rate of economic recovery among emerging countries—the main drivers of oil demand growth. Except for China, most are still battling the coronavirus and its effects on their economies. India is a good case in point: its oil demand is seen to be the worst affected by the coronavirus as the country itself suffers the second-highest total case count in the world.

Some analysts believe, however, that demand in China is about to start slowing down soon. It will be a long-term trend, according to the Oxford Institute for Energy Studies, and a result not just of Covid-19 but of Beijing’s emission-reduction goals. Over the next 20 years, the energy research organization said, China’s oil demand was likely to grow at an annual pace of 3 to 4 million bpd, after growing by double-digit rates in the past few years.

According to Mercuria’s Dunand, oil demand during the fourth quarter will average 95 million bpd. That’s down from a market consensus of 97 to 98 million bpd, made in spring. And the rate at which excessive inventories will be drawn is seen weaker than previously expected. Add to this a dramatic build in diesel inventories because refiners, Dunand noted to Bloomberg, are dumping jet fuel into the diesel pool, and Libya’s restart of production and the outlook for prices once again becomes grim. 

According to the head of Mercuria, the biggest problem on the oil market is the diesel stock oversupply. With many countries in Europe restricting movement again, whatever improvement there had been in fuel demand—especially jet fuel—will likely slow down further now, if not reverse if a full-blown second wave of infections hits the continent. And the problem will persist.

Meanwhile, OPEC is out of options. The cartel and its partners in OPEC+ will discuss the next steps later this year, with the original plan involving a further relaxation of the cuts, by 2 million bpd, from January 2021. The way prices are moving now and likely to move during the final quarter, this may become a topic of arguments within the group, as some members need oil revenues more urgently than others.

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com:


Download The Free Oilprice App Today

Back to homepage





Leave a comment
  • Mamdouh Salameh on September 25 2020 said:
    This is a faulty reading of the global oil market. The current fundamentals in the market are strong enough to enable Brent oil prices to hit $45-$50 a barrel before the end of the year and $60 in early 2021. Furthermore, the global oil demand will end 2020 at 96 million barrels a day (mbd), a mere 5 mbd short of the 2019 level of 101 mbd.

    As long as civil war is continuing, Libya will be no threat to OPEC+. It will continue to be a mere footnote for the global oil market. Libya’s loss of 1.2 mbd of exports since 2011 has long been factored in by the market. Therefore producing 260,000 barrels a day (b/d) will hardly meet Libya’s domestic needs let alone impacting oil prices and supplies. Even that small production is tempremental. One day it is here and 24 hours later it has gone.

    Bullish influences in the market far outweigh bearish ones and the glut in the market is continuing to deplete surely but slowly.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • Jay Zee on September 25 2020 said:
    Oil bulls are again heading to the slaughter. It never ends, apart from minor blips, since 2014.
    Oil will decline to $25-$30 by January and will reach a lasting equilibrium price around there for years, before going into a terminal decline to $10 as existing fields requiring little to no more capex and can supply the world's needs essentially indefinitely.
  • George Doolittle on September 29 2020 said:
    Again I think these articles starting on or about a week ago are spot on as relates to oil prices and the current pricing environment being "Uber" bearish so to speak.

    The fact remains the British Petroleum has massive interests in Libya and is still being forced to pay an exorbitant dividend and so must run their interests "flat out" no matter the pricing prior to what everyone knows at some point to be inevitable (a massive dividend cut.) The North American energy Industry...by far the largest on Earth...has already had massive writedowns of perfectly good and I think still economic working assets. It's just common sense what is being expressed in this article.

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News