The OPEC+ group is expected to confirm next week its May-July plan to ease the oil production cuts by the planned 840,000 barrels per day (bpd) in July, OPEC+ delegates and two dozen analysts told Bloomberg News on Thursday.
The ministers of the OPEC+ group are meeting on Tuesday, June 1, and at present, no surprises are expected, despite this year’s track record of decisions surprising the market to both the bullish and bearish sides.
The collective OPEC+ oil production is set to rise by 350,000 bpd in both May and June and by more than 400,000 bpd in July. Additionally, Saudi Arabia is also gradually easing its extra unilateral cut of 1 million bpd over the course of the next few months, beginning with monthly production increases of 250,000 bpd in both May and June.
Overall, OPEC+ is expected to return to the market as much as 2.1 million bpd by July.
The decision from early April signaled the confidence of the leaders of the OPEC+ alliance that the market would be able to absorb that much supply as vaccination programs are accelerating and people start traveling more. OPEC+ and all analysts expect global oil demand to rebound strongly in the second half of 2021 and nearly reach pre-crisis levels by the end of the fourth quarter this year.
Despite the resurgence of COVID in major oil-importing markets in Asia such as India and Japan, OPEC and its allies, as well as forecasters and analysts, expect the market to absorb the additional barrels, even in case Iran returns legitimately among the oil exporters at some point in the second half of this year.
Russia estimates that the global oil market is currently in a deficit of around 1 million bpd, Deputy Prime Minister Alexander Novak said on Wednesday. Earlier this week, Goldman Sachs kept its outlook for oil prices to rise to $80 per barrel by the end of the year despite the possibility of Iran’s oil returning to the market.
By Tsvetana Paraskova for Oilprice.com
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Therefore, we should expect no surprises when OPEC+ meets on the 1st of June to review the market and approve July plans to boost oil production.
Brent crude could hit $70 a barrel much earlier than expected rising further towards $80 in the third quarter of this year and average $65-$67 for the year with global oil demand returning to pre-pandemic level by the middle of this year.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London