The group, known as OPEC+, seeks to eventually eliminate its
historic output cuts implemented at the start of the COVID-19 pandemic.
The global oil benchmark, Brent crude, fell by $0.44 to
$72.97 per barrel as of 7:28 pm Nigerian time on Wednesday.
After a couple of weeks of wrangling, OPEC+ resolved on July
18 to increase their overall production by 400,000bpd on a monthly basis
starting from August until phasing out the 5.8 million bpd production
adjustment.
The resolution put an end to an acrimonious spat between
Saudi Arabia and the UAE, which had arisen after the UAE had objected to Saudi
Arabia’s plan to tie OPEC+ production increases to a lengthening of the supply
management pact.
S&P Global Platts reported on Tuesday that OPEC
continued to forecast robust oil demand in the months ahead, bolstering the
case for the bloc and its partners to keep raising output, despite a volatile
market that was still assessing the impact of Hurricane Ida and stubbornly high
COVID-19 infections.
A slight slump in oil prices, with many economies still
struggling to contain the spread of the coronavirus, may have given some
members doubts, but analysis presented by the OPEC secretariat to a technical
committee co-chaired by Saudi Arabia and key non-OPEC ally Russia on Wednesday
indicated no need for a pause.
The forecast said the market would increasingly tighten in
the third and fourth quarters of this year, delegates in the closed-door
meeting told S&P Global Platts, with US production growth still stunted, while
consumption was expected to keep rising.
“It seems that the market can absorb the 400,000 bpd
[increase] for the next months, [though] of course, uncertainties around COVID
continue,” one delegate said, on condition of anonymity.
Traders are largely expecting OPEC+ ministers to heed the
guidance. Keeping a lid on production could stoke inflation across major
economies and destabilise the recovery from the pandemic.
Dated Brent prices have rebounded back above $70 per barrel
after starting August on the decline and sinking to a four-month low of $66.17
on August 19.
“Doesn’t feel like OPEC+ will reverse course in this meeting
with flat price where it is,” a crude oil trader in Singapore said.
Another trader with a South Asian refinery said, “Flat price
is strong and any trimming [in supplies] will increase fuel prices and lead to
inflation.”
However, delegates said that no decision had yet been made,
and the OPEC+ alliance had sometimes wrong-footed traders with a surprise.
A nine-minister advisory committee is scheduled to convene
at 4pm Vienna time (1400 GMT), followed by the full OPEC+ ministerial meeting
at 5 pm (1500 GMT).
The impacts of Hurricane Ida on crude production and
refining in and around the Gulf of Mexico will also be considered, delegates
said.
The storm, which ravaged Louisiana and Mississippi on August
29, forced some 1.7 million bpd of US offshore production to be shut in, as
well as about 2.2 million bpd of refining capacity.
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