The Global Oil Market needs much more crude than what the Organisation of Petroleum Exporting Countries (OPEC) along with its allies, OPEC+ is planning to add by the end of this year, the world’s biggest independent oil traders, Vitol, has said.
The OPEC+ coalition was set to agree last week to boost collective crude output by 400,000 b/d each month from August to December and extend their supply management agreement through the end of 2022.
But the UAE stymied the agreement by insisting its baseline production level from which its quota is determined should be raised, which other countries have said was unfair, delegates had told S&P Global Platts on the condition of anonymity.
“There is very little doubt, that whatever OPEC agrees by way of lessening of the cutbacks it will surely be a fraction of that amount needed to meet demand,” Head of Vitol, Asia, Mike Muller, said.
“OPEC are in a big chunk of the way towards their stated objective of getting the global inventory overhang back to manageable levels from their perspective, which is basically 2019 norm and we still have a market which has an outlook which for the spot months there is going to be more demand than supply,” he added.
Platts Analytics forecasts global oil demand will rise 8.8 million barrels per day from June to December.
OPEC’s two million barrels per day collective increment in supply between August and December is at the low end of demand estimates, according to Muller.
“I think there is 100 per cent consensus there that this sort of extra volume from OPEC+ combined with the fact that the rig count in the US is unable to bring us extra production from North America is going to see inventories continue to draw,” Muller said.
Ministers adjourned their online proceedings late July 2, agreeing to take the weekend to regroup and reconvene yesterday. But all OPEC+ agreements require unanimous approval.
The OPEC+ impasse helped push oil prices higher, with Platts assessing Dated Brent at $77.62/b on July 2, its highest since October 2018.