Opec+ committee expects market to return to surplus in 2022

The Opec+ joint technical committee (JTC) expects the oil market to remain in a 0.9 million barrel per day (bpd) deficit this year, but hit a surplus of 2.5 million bpd in 2022 as the group raises production, a presentation seen by Reuters showed.

The JTC, under a base-case scenario, expects global oil demand to grow by 5.95 million bpd this year, in line with its previous forecast, and by 3.28 million bpd next year.

The Organisation of the Petroleum Exporting Countries (Opec) and allies led by Russia, collectively known as Opec+, meet on Wednesday at 1500GMT to set policy.

Sources told Reuters the Wednesday meeting is likely to leave the plan unchanged despite pressure from the United States to pump more oil.

The JTC, which advises the meeting on market fundamentals, expects commercial oil inventories in OECD countries to remain below their 2015-2019 average until January next year but to exceed that average for the rest of 2022, the JTC presentation showed.

The presentation also outlined an alternative scenario, that assumes lower demand growth and non-Opec supply growth higher than the base case.

Under the alternative scenario, the oil market is expected to have a surplus of 400,000bpd in 2021 and 4.5 million bpd in 2022.

Oil slips ahead of Opec+ meet

Meanwhile, oil slipped on Tuesday as Opec and its allies geared up for a meeting on Wednesday amid calls from the United States to pump more crude, though Brent still traded well above $70 a barrel.

Prices were also under pressure from concerns that power outages and flooding in Louisiana after Hurricane Ida will cut crude demand from refineries.

Crude was also weighed down by manufacturing data from China, where factory activity in August expanded at a slower pace than in the previous month.

Brent crude futures for October, due to expire on Tuesday, fell 50 cents, or 0.7 per cent, to $72.91 a barrel by 1330GMT.

US West Texas Intermediate (WTI) crude futures were down 58 cents, or 0.8 per cent, at $68.63.

Both benchmarks were on track for their first monthly loss since March but were still not far from their July highs, when Brent rose to its strongest since 2018 and US crude since 2014.

In August US President Joe Biden’s administration urged the Organization of the Petroleum Exporting Countries (Opec) to boost oil output to tackle rising gasoline prices.

Prior to the US call, Opec and its allies, together known as Opec+, had agreed to add 400,000 barrels per day (bpd) to their supply each month until the end of December.

Sources told Reuters the Wednesday meeting is likely to leave the plan unchanged despite pressure from the United States to pump more.

“It looks like sticking to the plan from the last meeting,” an Opec+ source told Reuters.

Oanda analyst Craig Erlam also expects no changes to the Opec policy.

“It would be a surprise if they do anything at the moment, despite pressure from the White House, given current price levels, demand and (the) uncertain outlook,” he said.

Opec’s own data showed the market will face a deficit until the end of 2021 but then flip into a surplus in 2022.

Hurricane Ida, which made landfall in the United States on Sunday as a Category 4 hurricane, knocked out at least 94 per cent of offshore Gulf of Mexico oil and gas production and caused “catastrophic” damage to Louisiana’s grid.

On the supply side, about 1.72 million bpd of oil production and 2.01 million cubic feet per day of natural gas output remained offline on the U.S. side of the Gulf of Mexico after evacuations at 288 platforms. — Reuters