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OPEC+ JTC Raises 2022 Oil Market Surplus Forecast

OPEC+ sees oil market in a surplus of 3.1 million bpd in September, falling to 0.6 million bpd in October before rising to 1.4 million bpd in November. (Reuters)
OPEC+ sees oil market in a surplus of 3.1 million bpd in September, falling to 0.6 million bpd in October before rising to 1.4 million bpd in November. (Reuters)
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OPEC+ JTC Raises 2022 Oil Market Surplus Forecast

OPEC+ sees oil market in a surplus of 3.1 million bpd in September, falling to 0.6 million bpd in October before rising to 1.4 million bpd in November. (Reuters)
OPEC+ sees oil market in a surplus of 3.1 million bpd in September, falling to 0.6 million bpd in October before rising to 1.4 million bpd in November. (Reuters)

The oil market is likely to have a surplus greater than forecast earlier this year amid pressures from rising energy costs and tightening monetary policy that decreased demand for oil, OPEC + said in a report on Wednesday.

The report comes days ahead of an OPEC+ policy meeting on Sept. 5 and over a week after OPEC leader Saudi Arabia said the group may cut oil output.

The Joint Technical Committee (JTC), which met on Wednesday, advises the Organization of the Petroleum Exporting Countries and allies led by Russia, collectively known as the OPEC+ group of oil-producing nations, on market fundamentals.

Last week, Saudi Energy Minister Prince Abdulaziz bin Salman said OPEC stands ready to cut output to correct a recent oil price decline driven by poor futures market liquidity and macro-economic fears, which has ignored extremely tight physical crude supply.

Oil prices have been extremely volatile in recent weeks. While Prince Abdulaziz’s comments helped propel prices to a one-month high above $105 a barrel on Monday, Brent crude on Wednesday traded $10 a barrel below those levels, on expectations for lower demand.

At its last meeting, OPEC+ agreed to raise production targets by 100,000 bpd for September, having unwound record cuts of about 10 million bpd that it agreed in 2020 to help counter the impact of the pandemic.

The JTC report said oil demand - which it sees growing 3.1 million barrels per day (bpd), this year - faces major uncertainties particularly from rising inflation and tightening monetary policy, which are eating in to consumers’ budgets.

“Rising energy prices pose another risk going forward,” the report said. “The latter may lead to a more significant reduction in consumption than currently anticipated, especially towards the end of the year.”

The oil market surplus this year reaching 900,000 bpd, up 100,000 bpd from its previous forecast, the report seen by Reuters showed.

Under its base case scenario, the JTC sees the oil market in a surplus of 3.1 million bpd in September, falling to 0.6 million bpd in October before rising to 1.4 million bpd in November.

OPEC+ also expects a surplus of 900,000 bpd next year under its base scenario, the report showed.

Meanwhile, a Reuters survey found on Wednesday that OPEC oil output rose in August to its highest since the early days of the pandemic in 2020 as Libyan facilities recovered from unrest and Gulf members raised output to unwind a production cut deal with allies.

OPEC has pumped 29.58 million bpd in August, the survey found, up 690,000 bpd from July and the highest since April 2020, according to the survey.

With many producers lacking the capacity to raise output due to insufficient oilfield investment, the 10 OPEC members managed a 300,000 bpd increase from July and are still pumping far less than called for, the survey found.

Output from the 10 members was 1.4 million bpd below the August target, versus a 1.3 million bpd shortfall in July.

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OPEC Secretary General: Producing Critical Minerals in Future Not Only Dependent on Renewable Energy

Trucks transporting minerals from the mountains (Getty)
Trucks transporting minerals from the mountains (Getty)
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OPEC Secretary General: Producing Critical Minerals in Future Not Only Dependent on Renewable Energy

Trucks transporting minerals from the mountains (Getty)
Trucks transporting minerals from the mountains (Getty)

OPEC Secretary General Haitham Al Ghais said on Monday that those that talk of critical minerals delivering the world a future of only renewables and EVs, are not providing a full picture.

In an article published on the organization’s official website, Al Ghais spoke about the many future energy pathways for nations and peoples across the world, affirming that “we all need to be realistic about how these can be achieved.”

Al Ghais said that sustainable energy pathways are vital for populations all over the world. However, he noted, “we need to appreciate the real-world impacts of scenarios and policies aimed at ramping up renewables and electric vehicles (EVs). There are many elements that filter into this, a central one being the role played by critical minerals.”

At this point, he mentioned the International Energy Agency (IEA), which says that in its Net Zero Emissions (NZE) by 2050 Scenario, demand for critical minerals quadruples by 2040.

“It is a pace never seen before in history,” Al Ghais wrote.

He noted that while these minerals, such as copper, cobalt, silicon, nickel, lithium, graphite and rare earths underpin the development of renewables and EVs, OPEC Member Countries are investing heavily in renewables, in all stages of their supply chains, and participating in the development of EVs.

OPEC attaches an importance “to the role of renewables and electrification in our energy future,” he said.

Al Ghais then posed several questions on the nature of such an expansion of critical mineral requirements.

“Is this kind of expansion truly feasible? What are the implications? How sustainable is it? And how important is oil and gas to the expansion of critical minerals, as well as renewables, EVs and grids,” he asked.

In the mentioned IEA scenario, Al Ghais said that by 2040, copper demand rises by 50%, rare earths demand almost doubles, cobalt demand more than doubles, and nickel demand is close to tripling.

“These are nowhere near the largest increases either. Graphite demand grows almost four times, and lithium sees a nearly ninefold expansion by 2040, underlining its crucial role in batteries,” he noted.

The OPEC Secretary General affirmed that this will require the construction of a huge number of new mines.

“Back in 2022, the IEA said that by 2030 alone, the world would need to build 50 new lithium mines, 60 new nickel mines and 17 cobalt mines,” he said.

He added, “It should be borne in mind that, historically, critical supply chain projects, such as for these types of commodities, have had long development lead times, from discovery to first production.”

Here, Al Ghais asked another question: is such growth realistic? And what might the impact be if growth comes up short, and equally importantly, what if policymakers have also followed a path of no longer investing in new oil and gas projects?

The Secretary General said EVs, wind turbines, solar panels, as well as new grids, are all hungry for critical minerals.

“An EV contains approximately 200 kg of minerals,” he explained. “For contrast, a conventional car uses around 34 kg. One megawatt of electricity produced by an offshore wind turbine requires around 15 tons of minerals, while the figure for solar is around seven tons. For natural gas, it is just over 1 ton.”