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OPEC+ still expects the global oil market to be in a surplus this year, but has revised the overhang by 100,000 bpd to 1.3 million bpd, Reuters reported citing the group's Joint Technical Committee, which met yesterday ahead of today's monthly meeting of OPEC+.
The meeting itself is unlikely to produce any shocks: according to unnamed sources cited by Reuters, the cartel planned to stick to its arrangement of adding 400,000 bpd in collective output to its monthly total until national production levels returned to pre-pandemic levels.
This, however, may be tough for many members of the group, which have been struggling for months to meet the quotas assigned to them under the agreement that marked the beginning of a reversal in the deepest oil production cuts ever made by OPEC and its Russia-led partners. In response to the pandemic and the destruction of oil demand it caused, the group agreed to take almost 8 million bpd off the market.
The production cuts, combined with lower investments in maintenance and lower oil exploration, reduced OPEC+'s spare capacity substantially, prompting warnings that this would bring down global spare oil capacity to the lowest in more than two decades.
Even high prices seem to have not managed to convince OPEC+ to pump more, based on information from Reuters' unnamed sources from inside the cartel, with one of them saying, "The issue (of speedier increases) did not come up and I doubt it will."
This could be because OPEC+ likes prices where they are, or it could be because of the spare capacity problem that has been behind the consistent failure of the group to deliver on its monthly quotas for several months in a row.
"The oil market is currently unreservedly bullish," Tamas Varga from PVM told Reuters this week. "It is international tension, the perception of tight supply and the cold winter that are the most important factors behind the strength."
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.