The OPEC+ oil alliance should consider delaying its planned output boost by between three and six months, a technical panel that advises ministers suggested. The coalition — led by Saudi Arabia and Russia — is scheduled to increase crude production by almost 2 million barrels a day in January, having initially anticipated that a global economic recovery would rekindle fuel demand. The Joint Technical Committee, that met online on Monday, came to the view that risks for the oil market are skewed to the downside as a resurgence of the coronavirus triggers a new wave of lockdowns.
The JTC suggested that a panel of ministers from the Organization of Petroleum Exporting Countries and its allies, which is meeting on Tuesday, the Joint Ministerial Monitoring Committee, should consider scenarios of delaying the supply increase by between three and six months. The 23-nation alliance will make a final decision when it meets between Nov. 30 and Dec. 1.
Assuming OPEC+’s planned production hikes go ahead, the JTC projects that global oil supply could exceed demand next year by an average of 1.5 million barrels a day if the rebound in consumption is weaker than expected, a delegate said. However, its base-case projection is that consumption will be higher than supply in 2021, depleting world stockpiles at a rate of 800,000 barrels a day.
While oil prices rallied to $45 a barrel in London last week following news of a breakthrough on a Covid-19 vaccine, they remain far lower than most OPEC nations need to cover government spending.
OPEC Secretary-General Mohammad Barkindo told the committee, at the opening of Monday’s video conference, that the producers should be ready to respond to shifts in market fundamentals, the organization said on Twitter.