Days after OPEC + gradually ramped up production and added about 2 million bpd to global supply by July, Saudi Energy Minister Prince Abdulaziz bin Salman hinted that the cartel could change course if necessary.
Bloomberg quotes the official as saying that there was nothing in the oil markets to hinder the cartel, but the oil ministers will continue to meet each month and be ready to change course if needed.
It may be necessary at some point unless the pandemic situation changes drastically for the better. Infections are flaring up in many parts of Europe, new cases are still high in Brazil and India, and global rollout of vaccines is not going as fast as many would have liked.
On the other hand, according to most economists and analysts, the US economy will soon be on the cusp of full throttle, thanks to the generous federal stimulus program and rapid progress with vaccinations.
Still, concerns about the demand remain, including in OPEC, as shown by Bin Salman’s suggestion that the cartel could change course if necessary. When OPEC + agreed to increase production, it did so with a strong expectation that global demand will pick up in a few months.
Even if that is the case, more oil from Libya will enter the world market, and if the US and Iran reach an agreement on the nuclear deal, much more Iranian oil will also pour in.
Oil prices are already constrained by the pandemic-related uncertainty surrounding the global economy, and any additional pressure would lower them, prompting OPEC to intervene, which is likely to happen.
In a bit of good news for the cartel, the Energy Information Administration has revised its US oil production forecast downward this year from 11.15 million bps last month to 11.04 million bps, due to the impact of the Texas Freeze .
By Irina Slav for Oilprice.com
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