When OPEC and its allies met last month, Saudi Arabia’s energy minister dared oil speculators to test his determination to stabilize global markets. Now that a resurgent pandemic is threatening demand once again, the moment of reckoning is getting closer.

While members are publicly sticking with that plan for now, OPEC Secretary-General Mohammad Barkindo acknowledged on Thursday that demand is “anemic” and the cartel will act to prevent a market “relapse.” Its own internal reports points to the risk of a new surplus. And in private, delegates admit they’re open to delaying the increase when a formal decision is taken in six weeks.

Bad Gambit?

If OPEC+ boosts supplies as planned, stock draws will slow

Source: IEA

Trading houses like Mercuria Energy Group, banks including JPMorgan Chase & Co. and institutions such as the International Energy Agency are counseling that markets remain too fragile to easily absorb the additional barrels.

“Adding oil to the market at such a time is not an advisable gambit,” said Natasha Kaneva, an analyst at JPMorgan in New York.

These views may be considered during Monday’s online session of the Joint Ministerial Monitoring Committee, chaired by Saudi Arabian Energy Minister Prince Abdulaziz bin Salman and his Russian counterpart Alexander Novak. The panel won’t decide on next year’s supply, which will be finalized at the larger ministerial meetings on Nov. 30-Dec. 1.

It’s a decision that will have profound implications not just for the Organization of Petroleum Exporting Countries — many of whose member nations need prices significantly above current levels to cover government spending — but also the wider industry, from shale drillers to majors like Exxon Mobil Corp.

Glimmer of Hope

There have been glimmers of hope for oil prices recently that producers must take care not to snuff out.

Global oil demand has recovered to 94% of pre-pandemic levels, depleting the world’s bloated inventories, the International Energy Agency estimates. Buyers in China, the world’s second-biggest consumer, are set to boost purchases after slowing down over the summer. Indian refiners are cranking up operations before the nation’s two main festivals.

Stronger consumption from the two Asian behemoths will play a big part in the final decision in December. Ministers will also consider data from other parts of the world as the virus spreads, and the result of the U.S. presidential elections in early November.