OPEC and its allies concern a protracted second wave of the Covid-19 pandemic and a leap in Libyan output might push the oil market into surplus subsequent yr, in accordance with a confidential doc seen by Reuters, a gloomier outlook than only a month in the past.
A panel of officers from OPEC+ producers, referred to as the Joint Technical Committee, thought-about this worst-case state of affairs throughout a digital month-to-month assembly on Thursday. In September, the panel had not seen a surplus beneath any situations it thought-about.
Such a surplus might threaten plans by OPEC, Russia and allies, referred to as OPEC+, to taper file output cuts made this yr by including 2 million bpd of oil to the market in 2021.
The Group of the Petroleum Exporting Nations has not indicated any plan to date to scrap that offer enhance.
“The sooner indicators of financial restoration in some components of the world are overshadowed by fragile situations and rising scepticism in regards to the tempo of the restoration,” in accordance with the doc used within the panel’s month-to-month assembly in October.
“Specifically, a resurgence of Covid-19 instances the world over and prospects for partial lockdowns within the coming winter months might compound the dangers to financial and oil demand restoration,” it stated.
The doc offered situations that included a base case that also confirmed a deficit in 2021 of 1.9 million barrels per day (bpd) on common, albeit lower than the deficit of two.7 million bpd forecast within the earlier month’s base case.
However beneath its worst-case state of affairs, the doc stated the market might flip right into a surplus of 200,000 bpd in 2021.
This yr, OPEC+ agreed to make file output cuts to help plunging costs as oil demand collapsed. It minimize 9.7 million bpd from Could, tapering that to 7.7 million bpd from August. From January, cuts are as a consequence of ease to five.7 million bpd.
Nevertheless, because the JTC met in September, Libyan output has climbed and a worldwide rise in coronavirus instances has led to renewed restrictions on motion in some nations, weakening demand for crude.
OPEC-member Libya is exempt from any manufacturing cuts.
Underneath the doc’s worst-case state of affairs, Libyan manufacturing would rise in 2021 to as a lot as 1.1 million bpd, a supply accustomed to the main points of the assembly stated. Underneath its base case, Libyan output can be 600,000 bpd in 2021.
Underneath the worst-case state of affairs, OECD business oil inventories – a benchmark OPEC+ makes use of to gauge the market – would stay excessive in 2021 in comparison with the five-year common slightly than beginning to fall beneath that mark.
This state of affairs additionally sees a stronger and extra extended second wave of Covid-19 within the fourth quarter of 2020 and first quarter of 2021 in Europe, america and India resulting in a decrease financial restoration, weakening oil demand.
Underneath the doc’s base case, OECD oil shares are anticipated to face barely above the five-year common within the first quarter of 2021, earlier than falling beneath that stage for the remainder of the yr.
A ministerial OPEC+ panel, referred to as the Joint Ministerial Monitoring Committee (JMMC), will take into account the outlook when it meets on Monday. The JMMC could make a coverage advice.
Oil ministers from OPEC+ nations are scheduled to satisfy once more on Nov. 30-Dec. 1.