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The OPEC+ group plans to taper the ongoing oil production cuts as of January 2021, as initially agreed, the energy minister of OPEC’s third-largest producer, the United Arab Emirates (UAE), said on Tuesday.
Speaking to the Energy Intelligence Forum, UAE’s Energy Minister Suhail al-Mazrouei said, as carried by Reuters:
“We in OPEC+ have set a plan and that plan... started with the almost 10 million or 9.7 million barrels (per day) reduction. That volume has been reduced, and it will be reduced again at the end of this year as we walk to 2021.”
OPEC and its partners led by Russia agreed in April to reduce their combined oil production by 9.7 million barrels per day in response to the demand slump following the outbreak of coronavirus that caused prices to tank. The cuts were relaxed by 2 million bpd starting in August and are set to be eased by another 2 million bpd from January 2021.
According to the UAE’s oil minister, “We believe that this is the calculated volume to cater for the demand coming back.”
While OPEC’s number 3 expressed confidence that more oil demand will return next year, OPEC itself and many analysts warn that the pace of demand recovery could further slow with the rise of coronavirus cases in many countries.
Concerns over the timing of the demand recovery have reportedly prompted OPEC’s top producer and de facto leader, Saudi Arabia, to consider delaying the easing of the production cuts, The Wall Street Journal reported last week, citing senior oil advisers from the Kingdom.
In its Monthly Oil Market Report (MOMR) out on Tuesday, OPEC warned that global economic recovery would likely stall in the latter part of this year and early next year, and cut its 2021 annual demand growth projection by 80,000 bpd to 6.5 million bpd.
“While the 3Q20 recovery in some economies was impressive, the near-term trend remains fragile, amid a variety of ongoing uncertainties, especially the near-term trajectory of COVID-19. As this uncertainty looms large, amid a globally strong rise in infections, it is not expected that the considerable recovery in 3Q20 will continue into 4Q20 and in 2021,” OPEC said today.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com