On Wednesday, the Organization of Petroleum Exporting Countries and its allies (OPEC+) decided to scale back its record oil output cut pact starting in August as the global economy has gradually recovered from the impact of coronavirus pandemic.
From August, OPEC+ would cut oil output by 7.7 million bpd, from the current 9.7 million bpd of cuts started in May.
However, Saudi Arabian Energy Minister Prince Abdulaziz bin Salman said that the actual cuts in August and September would amount to 8.1-8.3 million bpd as some countries have to compensate of their lack in complying with their quotas in May and June.
He added that Saudi Arabia’s oil exports in August would be unchanged from July, as around 0.5 million bpd of the extra oil was set to pump would be consumed domestically.
Separately, on Tuesday, OPEC has estimated that in 2021, the global oil demand would recover by 7 million bpd after this year’s fall of 9 million bpd.
However, OPEC+ also expected that if the second wave of coronavirus occurred, the 2020 demand could be deepened by 11 million bpd, which would make the group’s effort to balance the oil market fall through. It would also jeopardize OPEC’s plan to put an additional 6 million bpd capacity online next year.
Analyst Paola Rodriguez-Masiu from Rystad Energy commented that the demand would depend on the outcome of the pandemic crisis. She added that the estimation of demand could be dragged down by the prospect of the return of Libya’s oil production.
She also opined that the Americas could weigh the oil market rebalancing effort as the infections keep rising and prospects of new restrictions are real in some states.
