OPEC+ Ministerial Meeting: how will they handle the balancing act?

 

World oil demand in 2022 - OPEC

The JTC, Joint Technical Committee of the OPEC+, released its data on the eve of the group’s ministerial meeting scheduled on Tuesday evening at 17:00 at Vienna time.

According to the JTC, the global demand of crude oil is going up at a steady rate, but the supply will not be able to catch up with it that could result in a tighter market.

The reason, according to the JTC, is the depletion of the global crude oil stocks twice as fast as the daily increase in the output by the OPEC+, began in August for a period of four months; the figures in question are 825,000 and 400,000 bpd respectively.

Under immense global pressure, the OPEC+ is expected to reverse the production cuts implemented last year in order to lift the crude oil price from rock-bottom values; the cuts were substantial.

If they restore the cuts, the JTC of the OPEC+ argues, there will be a surplus during the early part of 2022 that could prevail throughout the year – an anxious scenario for the producers.

The numbers are alarmingly staggering: a surplus of 2.5 million bpd!

It is based on an assumption, indeed. The assumption is that the OPEC+ will restore 6 million bpd that it agreed on to cut in order to revive the oil price.

This scenario, which some members will find suicidal, is highly unlikely, given the economic price that the producers collectively paid when the price of oil crashed in 2020, hitting once at negative values for the first time ever.

The OPEC+, however, will not be able ignore the global pressure either, especially at a very difficult time for the global economies, ranging from the developed to developing world.

In this context, analysts are keen on the outcome of the latest OPEC+ ministerial meeting where the key decision makers have to walk the tight rope of the balancing act.

 

 

 

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