Opec+ discusses weaker oil demand outlook, Libya output
An Opec+ technical committee yesterday discussed higher oil supply as production resumes in Libya along with a weaker demand outlook due to a second wave of coronavirus infections, two Opec+ sources said.
The Joint Technical Committee, which includes representatives from key Opec+ producers such as Saudi Arabia and Russia, met to review compliance with its global oil output cuts and to review the oil market.
Opec+ – producers from the Organisation of the Petroleum Exporting Countries and others including Russia – have been reducing output since January 2017 in a bid to balance the market, support prices and reduce inventories. They are currently curbing production by 7.7mn barrels per day (bpd), down from 9.7mn bpd, and are due to taper their production cuts by 2mn bpd in January.
But a bearish demand outlook and rising supply from Libya mean Opec+ could roll over existing cuts into next year and delay easing the reductions, Opec+ sources say.
The group had 102% compliance with its production cuts in September, two Opec+ sources told Reuters.
At yesterday’s meeting, Opec+ delegates discussed a slow demand recovery in the fourth quarter of this year, when seasonally it was expected to rise, one of the sources said. The resumption of oil production from Libya and lack of a vaccine for Covid-19, plus a rise in infections and renewed restrictions to try to contain the pandemic, could mean a downward revision for oil demand, creating a bearish outlook for the market in the coming months, this source said. The panel discussed a scenario where demand would contract by 10.8mn bpd in 2020 and Libyan production would rise, creating an OECD stocks overhang at 265mn barrels above the latest five-year average in the last quarter of this year, the source said.
For 2021, stocks would be at 301mn barrels above the five-year average in the last quarter, compared with 245mn, 181mn and 173mn in the first three quarters. Page 2