Estimates of the supply surplus in the first quarter have. Although the cartel is lagging far behind the return of pre-crisis production levels, OPEC and its allies agreed to increase production according to the approved plan in the summer as the prospects for global oil markets improve as demand largely withstands the new version of the coronavirus.
According to delegates, an alliance of 23 countries led by Saudi Arabia and Russia approved an increase of 400,000 barrels per day, scheduled for February, on Tuesday. The group is sticking to its plan to gradually restore production halted during the pandemic after its analysts predicted a smaller surplus this quarter than previously expected.
Global fuel consumption continues to recover after the 2020 crash. Consumer mobility and production activity in key Asian consumer countries are growing, crude oil reserves in the United States are shrinking, resulting in world oil prices rising to almost $ 80 per barrel.
OPEC has already restored about two-thirds of the production they cut in the early stages of the pandemic. They are striving to return the rest of the reduced supply at a pace that corresponds to the recovery of fuel consumption. Such an adjustment will prevent any price spike threatening a new decline in demand. OPEC and its partners still expect an oversupply to appear this month, and the latter seems to be smaller than previously thought.
Compared to later contracts, the growing price premium of short-term Brent crude futures suggests that the market remains in short supply. On Monday, the group’s Joint Technical Committee concluded that production would exceed global demand by one million four hundred barrels per day in the first three months of the year, up from 1.9 million in its previous estimate.
One of the delegates, the cartel, is not concerned about the increase in supply during the formation of its surplus because fuel reserves are currently at a low level and during a seasonal lull.
According to the JTC, inventories in developed countries were 85 million barrels below the average from 2015 to 2019 as of November. In a separate and very brief online meeting on Monday, OPEC ministers appointed a veteran Kuwaiti oil executive, Haitham al-Gais, as their head. He will take up this post in August after the expiration of the term of office of the current Secretary-General, Mohammad Barkindo.