The OPEC+ panels will not be discussing next week any revisions of the ongoing production cut pact and are not expected to make any major decisions to tweak the deal, Russia’s Energy Minister Alexander Novak said on Thursday.
The volatile oil market and the highly uncertain trajectory of global demand recovery has forced the OPEC+ group to have the Joint Ministerial Monitoring Committee (JMMC) hold meetings every month until the end of 2020, instead of ahead of every full OPEC+ meeting only.
The meetings of the Joint Technical Committee (JTC) will and the Joint Ministerial Monitoring Committee (JMMC) for August are scheduled for August 17 and August 18, respectively, OPEC said in its July meeting at which it noted that market conditions and conformity levels were improving.
The JMMC meeting will likely be held on August 19, a day later than originally planned, Russia’s news agency TASS quoted Novak as saying.
No one has put forward any sudden proposals for changes or additional proposals regarding the cuts, Novak said.
As of August 1, the OPEC+ group – led by Saudi Arabia and Russia – is easing the record collective cut of 9.7 million bpd to 7.7 million bpd.
“I think that our long-term planning has shown that the right decisions were taken and that the market is now more or less stabilized,” the Russian minister said. Related: Iran Seizes Oil Tanker In Strait Of Hormuz
“We are seeing a gradual rebalancing of the market,” Novak noted.
The OPEC+ panel meetings next week come as growing concerns about the lasting impact of the coronavirus pandemic has prompted OPEC and the International Energy Agency (IEA) to revise down their oil demand projections for this year, acknowledging that COVID-19 would impact oil demand more than previously thought. Due to the coronavirus shock to the global economy, the world’s oil demand is expected to drop by 9.1 million bpd in 2020 – a larger demand loss than OPEC had estimated just a month ago, the cartel said on Wednesday.
On Thursday, the IEA downgraded its oil demand forecast for this year by 140,000 bpd from last month’s projection. This was the first downgrade in several months, “reflecting the stalling of mobility as the number of Covid-19 cases remains high, and weakness in the aviation sector,” the IEA said.
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By Tsvetana Paraskova for Oilprice.com
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And contrary to pessimistic projections by both OPEC and the International Energy Agency (IEA), global oil demand and prices are headed upward underpinned by two major bullish influences.
The first is China’s bounce back and the fact that Asian oil demand which accounts for 40 % of global demand is virtually back to 2019 levels. Moreover, during the first half of the year China’s crude oil exports broke all previous records and were 10% higher than the first half of 2019 despite the destructive COVID-19 pandemic.
The second bullish influence is the steep decline in US oil production by an estimated 6.3 million barrels a day (mbd) this year because of the pandemic. As a result, US oil production will be struggling this year and the following years to even reach 6-7 mbd.
Based on the above, oil prices are projected to hit $45-$50 a barrel in the second half of 2020 and hit $60 in early 2021. Furthermore, global oil demand is also projected to recover to 2019 level sometime in 2021.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London