Page 5 - FSUOGM Week 42

FSUOGM COMMENTARY FSUOGM

the five-year average in 2021 under OPEC+’s Oil demand has recovered to 92% of the
worst-case scenario. Under the base-case, stocks pre-pandemic level, but “it’s too early to declare
would fall below that level after the first quarter an end to the Covid-19 oil demand destruction
of the year. era,” Dickson said.
The IEA warned on October 14 that OPEC+’s OPEC+ members that have produced more
plan to ease reductions in January left little room than their quotas have until December 20 to
for the market to absorb any extra supply in catch up. Russia, for one, has produced about
the coming months. The Paris-based agency 760,000 bpd more than it should have since
estimates it could take until 2027 for oil con- the cuts began in May, exceeding its quota by
sumption to rebound to pre-pandemic levels if 200,000 bpd in September alone.
the economic recovery is slow. It could occur in “While Russia hasn’t formally made a vow to
2023 if COVID-19 is brought under control in do better, the open communication line between
2021 and the economy returns to its previous Moscow and Riyadh is a promising sign there is
size that year. something in the works, and that the dramatic
Saudi Aramco CEO Amin Nasser is more oil price war of March will not be repeated,”
bullish on the market’s recovery, predicting that Dickson said. “Continued participation in the
demand will return to the 2019 level in 2022, as deal from Russia, now the group’s largest crude
long as COVID-19 is supressed next year. oil producer, is essential for market management
into 2021.”
No change in policy yet The shift in OPEC+’s forecasts comes after
The OPEC+ ministerial panel, known as Joint Saudi Crown Prince Mohammad bin Salman
Ministerial Monitoring Committee (JMMC), (MbS) and Russian President Vladimir Putin
reviewed the committee’s outlook when it met put on a public show of support for the alliance,
on October 19. The panel agreed to continue stressing its “importance” in the face of unprec-
honouring the current commitments, Russian edented market uncertainty.
Energy Minister Alexander Novak told Russia The two leaders discussed OPEC+’s current
media. agreement in a telephone call last week, the
No delay to the easing of cuts in January was Saudi state-owned news agency SPA and the
announced, although Saudi Energy Minister Kremlin’s press service have reported. They also
Prince Abdulaziz bin Salman called on the group reviewed the oil market’s current state and efforts
to be “proactive” in addressing the market situ- to “achieve and maintain stability,” according to
ation. This suggests that a shift in policy may be SPA.
on the cards at a later stage, perhaps at the meet- “Both sides have reiterated their willingness
ing of OPEC+ oil ministers on November 30 to to continue close co-ordination in this area in
December 1. order to maintain stability on the global energy
“It feels like March days again,” Louise Dick- market,” the Kremlin said in a statement on
son of Oslo-based Rystad Energy commented in October 17.
a research note. “OPEC+ avoids committing to Brent closed at $42.62 per barrel on October
deeper cuts until the market is once more on the 19, down from $42.93 at the end of the previous
brink of oil price collapse. And we aren’t quite trading session, and continued falling on Octo-
there yet, thus the lack of action.” ber 20. ™

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