Page 10 - MEOG Week 42

MEOG PERFORMANCE MEOG

OPEC+ warns of oil surplus in 2021

OPEC+ RUSSIA, Saudi Arabia and other members of the swing to a 200,000 bpd surplus.
OPEC+ oil alliance have warned that a sustained Another threat comes from Libya, the com-
second wave of the coronavirus (COVID-19) mittee said, where output has been rising since
pandemic and a surge in Libyan output could a blockade of exports by rebel forces was lifted
push the oil market back into surplus next year. last month.
A panel of officials from the 23 OPEC+ Libya is an OPEC member but was exempted
member countries, known as the Joint Techni- from cuts because of its civil war. OPEC+’s
cal Committee, held a virtual monthly meeting worst-case scenario sees the country’s produc-
on October 15. tion rising to as much as 1.1mn bpd in 2021 if
They considered this renewed surplus to be the ceasefire is maintained, while its base-case
a worst-case scenario, Reuters reported citing a envisages a growth to only 600,000 bpd.
confidential document. They had ruled this out There were fears of oil storage running out of
as a possibility in their September meeting. space in many regions at the height of pandemic
OPEC+’s unprecedented cuts to production lockdowns, and storage levels would once again
since May have been critical in rebalancing swell if a surplus emerged next year. OECD com-
global supply with demand since the coronavi- mercial oil inventories will remain higher than
rus pandemic struck. But the cartel brought back the five-year average in 2021 under OPEC+’s
some 2mn barrels per day of output in August, worst-case scenario.
easing total cuts to 7.7mn bpd. They had hoped Under the base-case, stocks would fall below
to taper the cuts by a further 2mn bpd at the start that level after the first quarter of the year.
of 2021, but a looming surplus could threaten The IEA warned on October 14 that OPEC+’s
these plans. plan to ease reductions in January left little room
OPEC+ is yet to signal that it is considering for the market to absorb any extra supply in the
such a step. coming months.
“In particular, a resurgence of COVID-19 The Paris-based agency estimates it could
cases across the world and prospects for par- take until 2027 for oil consumption to rebound
tial lockdowns in the coming winter months to pre-pandemic levels if the economic recovery
could compound the risks to economic and oil is slow. It could occur in 2023 if COVID-19 is
demand recovery,” the document stated. brought under control in 2021 and the economy
The base-case scenario set out in the docu- returns to its previous size that year.
ment forecast that supply would still see a 2021 Saudi Aramco CEO Amin Nasser is more
deficit of around 1.9mn bpd, although this was bullish on the market’s recovery, predicting that
less than the 2.7mn bpd deficit forecast a month demand will return to the 2019 level in 2022, as
earlier. But the worst-case scenario warned of a long as COVID-19 is supressed next year.™

P10 www. NEWSBASE .com Week 42 21•October•2020