- OPEC+ met on Wednesday to assess compliance with the agreement and maintain the level of production cuts unchanged.
- OPEC+ has previously reduced the level of production cuts from August to 7.7 million barrels per day.
- OPEC’s own production has usually far exceeded 30 million barrels per day, but after this year’s production cut, OPEC’s output has remained at 20-22 million barrels per day
According to Reuters, due to concerns about the slow recovery of oil demand, the Organization of the Petroleum Exporting Countries (OPEC) and its allies (OPEC+) have put pressure on oil-producing countries whose output exceeds their target, requiring them to further reduce production in August-September.
“Crude and product price developments in the second half of 2020 will continue to be impacted by concerns over the second wave of infections and higher global stocks,” OPEC said in the report.
“Almost all forecasters expect jet fuel in 2021 to struggle making up for lost demand,” OPEC said. “Gasoline demand will face pressure to return to 2019 levels.”
According to reports, OPEC+ met on Wednesday to assess compliance with the agreement and maintain the level of production cuts unchanged. As Iraq, Nigeria, Angola, and Kazakhstan compensate for overproduction in May-July, the reduction in production this month and next month will be further increased.
Saudi Energy Minister Prince Abdulaziz bin Salman said:
“Based on the average projections of various institutions, including OPEC, EIA, and the IEA, it is estimated that the world will reach about 97% of pre-pandemic oil demand during the fourth quarter – which is a big recovery from the huge falls in April and May.”
It is understood that OPEC+ has previously reduced the level of production cuts from August to 7.7 million barrels per day. During the period from May to July 2020, the reduction in production reached a record 9.7 million barrels per day, equivalent to global supply, 10% of the volume to balance supply and collapsed demand.
According to reports, in the past few decades, OPEC’s own production has usually far exceeded 30 million barrels per day, but after this year’s production cut, OPEC’s output has remained at 20-22 million barrels per day.
The meeting on Wednesday only discussed the implementation of countries such as Iraq, Nigeria, Angola, and Kazakhstan. OPEC+ said in a statement that OPEC+ oil-producing countries that overproduced in May-July will make up for these excess productions in August-September, but did not disclose specific figures.
“It is very important to maintain full conformity,” said Russian Energy Minister Alexander Novak. It is reported that because Novak tested positive for the new coronavirus, he attended the meeting at home.
Abdulaziz said “we should work hard to clean up all past overproduction by the end of September, so as to get rid of this temporary compensation mechanism.”
Reuters reports that the next OPEC+ ministerial group meeting is scheduled to be held on September 17. Driven by the OPEC+ agreement, Brent crude oil has been traded at a nearly five-month high above $45 per barrel, and has more than doubled since it hit a 21-year low below $16 per barrel in April.
The report pointed out that many OPEC members need higher oil revenues to balance their budgets, but they also want to avoid oil prices far higher than $50 per barrel, because this will encourage the recovery of US shale oil production.