Some sources said that OPEC+ is likely to maintain its existing plans for crude output for November despite the oil price rally which hit the highest level in three years.
Previously, in July, the Organization of the Petroleum Exporting Countries and allies (OPEC+) agreed to raise crude output by 400,000 bpd/month, easing its 5.8 million bpd cuts. They also agreed to evaluate the deal in December.
OPEC Secretary-General Mohammad Barkindo commented, “OPEC and non-OPEC ministerial decisions to begin returning 400,000 bpd to the market each month continue to help balance the need for incremental increases to address demand while guarding against the potential for supply overhangs.”
According to a presentation seen by Reuters, the OPEC+ Joint Technical Committee (JTC) expected the oil market in a 1.4 million bpd surplus next year under its base scenario, slightly below the previous forecast of 1.6 million bpd.
In 2021, the oil market is seen to be in a 1.1 million bpd deficit in an assumption that demand growth is about 6 million bpd. By 2022, demand growth is predicted to be at 4.2 million bpd.
The JTC's agenda includes compliance with the existing cuts, which stood at 116% in August, which translates into the group cutting more than planned with several members facing domestic constraints on increasing output.
Therefore, major output increase by the group would have to rely on producers with spare capacities, such as Saudi Arabia and the UAE. This indicates a tighter oil market instead.
OPEC+ ministers would consider the JTC's findings before making a final decision. Recently, energy ministers from OPEC members Iraq, Nigeria, and the UAE said that the group saw no need to take extraordinary measures to change the existing agreement.
On a related account, Barclays analysts said that demand recovery would eventually offset OPEC+ moves to ease its output cut due to the imbalance of production capabilities.
