OPEC and allies set for another crude output increase

Vicious Indian third wave

Vicious Indian third wave
“Russia will undoubtedly push for a more rapid increase in production to support its economy, whereas Saudi Arabia is expected to favour the more conservative path agreed upon last month,” Weller said.

Riyadh could point to how markets have been shaken by a vicious third wave of the virus that has swept through India, the world’s third-biggest consumer of crude after the US and China.

Several other Asian countries have also had to adopt virus-related restrictions, representing a brake on demand.

OPEC has remained optimistic in its predictions for 2021, expecting demand to reach 96.5 million bpd, an increase of six million on 2020 levels.

This, combined with OPEC’s previous policy of production restraints, means analysts expect the market to tighten sufficiently by August for demand to start outstripping supply.

This has been reflected in recent movements in crude prices, which have climbed back to pre-pandemic levels.

Iranian enigma
Aside from demand, the other factor OPEC and its allies must take into account are the actions of other oil-rich states such as the world’s number one producer, the United States.

Changes among the alliance’s members themselves will no doubt also be on the agenda.

After facilities in war-torn Libya began producing again from the end of 2020, eventually adding a million bpd to the market, all eyes will be on Iran.

If negotiations in Vienna on the full revival of the 2015 nuclear deal are successful, it could lead to many economic sanctions on the Islamic republic being lifted, including the US embargo on Iranian oil exports.

If Iran were able to get back to its level of exports three years ago — when then US president Donald Trump withdrew from the nuclear deal and reimposed sanctions — it could mean an extra 1.5 million bpd coming to the market.