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OPEC+ sticks to its policy despite the high demand for oil

1 Sep 2021 02:13 PM

OPEC and its allies are likely to stick with their current policy of gradual increases in oil production, four sources said on Wednesday, despite revised demand forecasts in 2022 and facing U.S. pressure to raise output faster.

The Organization of the Petroleum Exporting Countries (OPEC) and its allies led by Russia, known as OPEC+, meet at 1500 GMT. They had agreed in July to gradually cancel record production cuts by adding 400K barrels per day to the market.

"OPEC+ will likely keep the deal as agreed," one of the sources said before Wednesday's talks.

On Tuesday, OPEC+ experts revised oil demand growth forecasts in 2022 to 4.2 million barrels per day, up from 3.28 million barrels per day previously, which could strengthen the case for increased production in the future.

The outlook for 2022 looks optimistic based on data for 2021. OPEC+ expects demand to grow by 5.95 million barrels per day this year after a record drop of about 9 million barrels per day in 2020 due to the Coronavirus pandemic, but demand increased by about 3 million barrels per day only in the first half from the year 2021.

The United States had called for faster production increases by OPEC+ as benchmark Brent crude was trading above $72 a barrel, near multi-year highs.

The revision of the demand forecast came during the meeting of the OPEC+ Joint Technical Committee (JTC), which on Tuesday presented an updated report on the state of the oil market in 2021-2022. OPEC+ sources said on Tuesday that the report, which has not been made public, expects a deficit of about 0.9 million barrels per day this year as global demand recovers.

The sources said the report initially projected a surplus of 2.5 million bpd in 2022, but that was later revised to a smaller surplus of 1.6 million bpd due to increased demand.

As a result, commercial oil stocks in the Organization for Economic Cooperation and Development, a group of mostly developed countries, will remain below the 2015-2019 average through May 2022 instead of the initial forecast for January 2022, according to the sources.

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