A few days after OPEC + ‘s greed to gradually increase production, adding about 2 million bpd to global supply by July, Saudi Energy Minister Prince Abdulaziz bin Salman suggested the cartel could change course if necessary.
Bloomberg quotes the official as saying that there is nothing in the oil markets to disturb the cartel, but oil ministers will meet every month and will be ready to change their approach if required.
It may become necessary at some point, unless the pandemic situation changes drastically for the better. Infections are spreading in many parts of Europe, the number of new cases is still high in Brazil and India, and the launch of vaccines on a global scale is not as fast as many would have liked.
On the other hand, the US economy is soon to pull all the strings, according to most economists and analysts, thanks to the generous federal stimulus program and the rapid progress of vaccinations.
However, concerns about the demand remain, including in OPEC, as evidenced by Bin Salman’s suggestion that the cartel could change course if necessary. When OPEC + agreed to start increasing production, it did so based on strong expectations that demand would return globally in a few months.
Even if it happens, there is more oil entering the world market in Libya, and if the US and Iran reach an agreement on the nuclear deal, there will be even more Iranian oil flowing.
Oil prices have already been constrained by pandemic uncertainty over the global economy, and any additional pressure would push them down, prompting OPEC to act, which it is likely to do.
In good news for the cartel, the Energy Intelligence Administration revised its forecasts for US oil production this year, from 11.15 million bpd last month to 11.04 million bpd, due to the consequences of the Texas Freeze.
By Irina Slav for Oilprice.com
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