The IEA’s recently published World Energy Outlook suggests a scenario in which the world does not reach consumption of 103 million barrels per day until 2023.
Concerns are mounting that a second wave of the pandemic will hobble demand in the oil market and that a plan by producing countries to raise output from next year would further depress prices.
Saudi Arabia, the biggest member of the Organization of the Petroleum Exporting Countries (OPEC), said they were committed to supporting the market, while three sources from producing countries told Reuters that the planned output increase from January could be reversed if necessary. OPEC and its allies, including Russia, collectively known as OPEC+, have reduced their output since January 2017 in a bid to support prices and reduce inventories.
“This group has shown, especially in this year, that it has the flexibility to adapt to changing circumstances when required,” Saudi Energy Minister Prince Abdulaziz bin Salman said Monday in a meeting of an OPEC+ ministerial monitoring committee (JMMC), adding that the organization would not ignore its responsibilities to the global marketplace.
As things currently stand, OPEC+ is reducing production by 7.7 million barrels per day (bpd), down from cuts totaling 9.7 million bpd enforced between May and August during the first wave of the pandemic. The group says it will reduce the cuts by a further 2 million bpd in January.
Yet a weak demand outlook amid a so-called second wave of COVID-19 could prompt OPEC+ to delay the reduction in curbs. Four OPEC+ sources speaking to Reuters on condition of anonymity said Monday’s panel did not make any formal recommendation on changing policy for 2021 ahead of the next full OPEC meeting on Nov. 30-Dec. 1.
OPEC, the EIA, IEA, and British oil major BP have all downgraded their expectations for when oil demand will return to 2019 levels. The IEA’s recently published World Energy Outlook suggests a scenario in which the world does not reach consumption of 103 million barrels per day until 2023.
Over the last four months, oil prices have remained remarkably stable. At some point they have to move, and OPEC+, like everyone else, is waiting. Between now and the next OPEC summit, we will have a hugely important U.S. presidential election and further knowledge of the extent of the second coronavirus wave and government responses.
Right now, OPEC+ is as unsure of the oil market as traders are.