OPEC and its allies on Wednesday agreed to stick to their existing policy of gradual oil output increases, despite revising its 2022 demand outlook upwards and ongoing US pressure to raise production more quickly.
The Organisation of the Petroleum Exporting Countries and allies led by Russia agreed in July to phase out record output cuts by adding 400,000 barrels per day (bpd) of oil a month.
Wednesday’s decision means that OPEC+ will release 400,000 bpd to the market in October again, after already doing so in September. The next OPEC+ meeting is scheduled for October 4.
“While the effects of the Covid-19 pandemic continue to cast some uncertainty, market fundamentals have strengthened and OECD stocks continue to fall as the recovery accelerates,” OPEC+ said in a statement.
OPEC+ experts on Tuesday revised the 2022 oil demand growth forecast to 4.2 million bpd, up from a previous 3.28 million bpd, potentially building the case for higher output in future.
The 2022 outlook looks optimistic based on 2021 data. OPEC+ expects demand to grow by 5.95 million bpd after a record drop of about 9 million bpd in 2020 due to the pandemic, but demand only rose by some 3 million bpd in the first half of 2021.
“Demand has disappointed relative to lofty expectations and there are still headwinds, particularly in Asia. We only expect demand to rise back to 2019 levels in the second half of 2022,” said Amrita Sen, co-founder of Energy Aspects think tank.
The United States has called for speedier output increases by OPEC+ as the benchmark Brent crude traded above $70 per barrel, close to multi-year highs.
The OPEC+ joint technical committee (JTC) on Tuesday presented an updated report on the oil market in 2021-2022.
Published in The Express Tribune, September 2nd, 2021.
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