OPEC+ has lowered its 2021 oil demand growth forecast by 300,000 barrels per day reflecting concerns about the market’s recovery amid a wave of new coronavirus lockdowns, a report from its experts panel meeting seen by Reuters showed.
The Joint Technical Committee, which advises the group of oil-producing nations that includes Saudi Arabia and Russia, met on Tuesday ahead of a ministerial meeting on Thursday to decide output policy.
“Despite the ongoing destocking of commercial OECD stocks, they remain above the 2015-2019 average, while recognising that prevailing volatility in the market structure is a signal of fragile market conditions,” the panel said in the report.
Under its base case scenario, it now expects oil demand to grow by 5.6 million barrels per day this year, down by 300,000 bpd from its previous forecast.
It also raised its global supply growth forecast by 200,000 bpd to 1.6 million bpd.
As a result, it now sees oil stocks in the industrialised world dipping below the 2015-2019 average in August, a month later than it previously forecast.
OPEC and allied producers, a group known as OPEC+, are currently curbing output by just over 7 million bpd in a bid to support prices and reduce oversupply. Saudi Arabia has added to those cuts with an additional one million bpd.
Saudi Arabia is prepared to support extending oil cuts and is also ready to prolong its own voluntary cuts, a source briefed on the matter told Reuters on Monday.
JP Morgan in research note said it believes OPEC+ will tread cautiously by largely rolling over its production cuts into May and that Saudi Arabia will extend its additional cut until the end of June.
“We expect the alliance to start adding production in 500,000 bpd increments beginning in June and lasting through August,” the bank added.
Reporting by Rania El Gamal and Ahmad Ghaddar; editing by Tom Hogue and Jason Neely