OPEC+ ministers expect a massive glut in the global market early next year to justify their plan of only gradually raising production. However, those forecasts are based on fanciful numbers, according to Bloomberg oil strategist Julian Lee. In the most optimistic case, OPEC+ expects the market to swing to a surplus of 2.5 million bpd in the first quarter of 2022 from a supply deficit of 2.7 million bpd in the third quarter this year.
The group also projects that its total production could align with its monthly target from October onward. In reality, these producers undershot their production target by about 660,000 bpd in September as some of them were struggling to meet their individual allocations, while others were limited by maintenance work. This means that OPEC+ producers raised their combined output by a mere 136,000 bpd, well below the promised 400,000 bpd.
Steady supply from exempt producers Iran, Libya, and Venezuela might offset some of the shortfalls from other producers, but it would still leave the group’s production at around 600,000 bpd below the forecast in October. Lee also said that even if the producers managed to boost output by 400,000 bpd each month as they planned, the glut next year would be much smaller than their forecasts suggest. If they add much less than that, the surplus virtually disappears.
