Mohammed Barkindo, the secretary-general of the Organization of the Petroleum Exporting Countries (OPEC) on Monday said oil stocks in OECD economies were expected to stand just above the five-year average through q1 2021 before falling to below such a level in the following quarter. Barkindo’s statement was based on OPEC’s estimates of a 9.5 million bpd contraction in this year’s global oil consumption, with non-OPEC liquids production expected to decrease by 2.7 million bpd.
OPEC and its allies, known as OPEC+, agreed to cut oil supplies by 9.7 million bpd starting in May this year to rebalance the global oil market which was then shocked by the COVID-19 pandemic. OPEC+ decided to ease supply reduction to 7.7 million bpd last month and is scheduled to relax the curbs further to 5.8 million bpd starting in January 2021 until April 2022. However, the alliance has not ruled out deepening output cuts if market situations warrant.
Earlier this month, OPEC projected that this year’s global oil demand would be 400,000 bpd lower than it had predicted last month. Meanwhile, the projection for next year was cut down by 770,000 bpd. Barkindo said that there’s oversupply risk of global oil inventories swelling by 1.3 billion barrels, bringing the world’s global oil storage near the brim.
OPEC+ collective compliance on the production cut reached 101% last month, but the burden was not shared equally. Saudi energy minister Prince Abdulaziz bin Salman warned laggard members to compensate for their overproduction in the coming months. OPEC+ is scheduled to hold the next Joint Ministerial Monitoring Committee meeting on October 19 to assess compliance and market conditions.
