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OPEC+ May Discuss Extending Oil Production Pact Beyond April 2022

The OPEC+ alliance could discuss on Thursday extending the current oil production pact beyond its original end date, April 2022, Reuters reported on Wednesday, quoting two OPEC+ sources.

The ministers of the OPEC+ producers meet on July 1 to decide how to proceed with the easing of the oil production cuts from August, when the group will have returned around 2 million barrels per day (bpd) from its oil output on the market. However, OPEC+ still keeps some 5.7 million bpd off the market, and analysts and traders expect the group’s decision tomorrow.

The alliance said on Tuesday that the overall conditions in the oil market had significantly improved in an optimistic assessment of fundamentals and prospects ahead of Thursday’s decision. 

Analysts largely expect OPEC+ to decide on July 1 to further ease the cuts as of August 1, with most experts gravitating toward a 500,000-bpd increase for the month of August.

Reports of possible discussions on Thursday about an extension of the agreement beyond April, on top of the talks about the August production levels, would fit an earlier Reuters report that the alliance sees a significant overhang of oil supply on the market after April 2022.

“In 2022, a significant increase is seen, leading to an overhang of 181 million barrels by the end of the year,” the Joint Technical Committee (JTC) of the OPEC+ group said in an internal report Reuters has seen.

While OPEC+ expects commercial oil stocks in OECD nations to be below the five-year average for the rest of this year, it expects the oversupply to return in the second half of next year, according to the JTC’s internal report.

This assessment of the panel, whose meeting on Tuesday launched this week’s decision-making gatherings of the coalition, suggests that OPEC+ may opt to continue the ongoing deal in some form after April 2022 to ensure a balanced oil market. 

By Tsvetana Paraskova for Oilprice.com

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