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.
