Days after OPEC+ greed to gradually ramp up production, adding some 2 million bpd to global supply by July, the Saudi energy minister, Prince Abdulaziz bin Salman has hinted that the cartel could change course if necessary.
Bloomberg quotes the official as saying there was nothing in oil markets that was bothering the cartel but the oil ministers will continue to meet every month and stand ready to change tack if this is called for.
It may well become called for at some point unless the pandemic situation changes drastically for the better. Infections are flaring up in many parts of Europe, new case numbers are still high in Brazil and India, and vaccine rollout on a global scale is not as fast as many would have liked.
On the flip side, the U.S. economy is soon about to be firing on all cylinders, according to most economists and analysts, thanks to the generous federal stimulus program and fast progress with vaccinations.
Yet demand concerns remain, including in OPEC, as evidenced by bin Salman's suggestion that the cartel may change course if necessary. When OPEC+ agreed to start raising production, it did so on strong expectations that demand will rebound globally in a few months.
Even if it does, there is more oil coming into the global market from Libya, and if the U.S. and Iran reach an agreement on the nuclear deal, there will be a lot more Iranian oil also flowing in.
Oil prices have already been constrained by the pandemic-related uncertainty bout the global economy, and any additional pressure would push them lower, prompting OPEC to act, which it will likely do.
In a bit of good news for the cartel, the Energy Information Administration has revised down its forecast for U.S. oil production this year, from 11.15 million bpd last month to 11.04 million bpd, because of the fallout from the Texas Freeze.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More