OPEC may delay tapering decision by quarter
BAKU, Azerbaijan, Nov.3
By Leman Zeynalova – Trend:
Additional supply from OPEC+ may not be needed just yet and the alliance might choose to delay the 2 mbd tapering decision by a quarter, from January 1 to April 1, Trend reports citing the US JP Morgan Bank.
“As demand recovery stumbles in Europe and the US, we now forecast that global oil demand will only expand to an average of 93.6 mbd in 4Q, still about 6.4 mbd lower yoy. With global supply almost 10 mbd off its 1Q20 peak, this should keep global supply/demand balances in a narrow deficit in 4Q and alleviate pressure on oil inventories. Though, the demand situation is not expected to improve much in 1Q21, where we see global oil consumption averaging 93.8 mbd, only a marginal quarter-over-quarter improvement.
“A flat demand profile and significantly faster-than-expected recovery in Libyan production means that the global oil market will likely find itself once again in surplus (+0.4 mbd) in 1Q21. Accordingly, we continue to believe that the additional supply from OPEC+ may not be needed just yet and the alliance might choose to delay the 2 mbd tapering decision by a quarter, from January 1 to April 1.
“Demand however is expected to resume its recovery from 2Q onwards, bringing total OECD (crude + product) inventories below their five-year averages by September 2021 —a one quarter delay vs our previous projection.
“With this forecast in mind, we believe that while a one-quarter rollover will not produce a significant effect on oil balances, it is premature to make adjustments to parameters of the long-term strategic OPEC+ deal at this stage. Essentially, we believe that there is not budgetary incentive for neither Russia, nor Saudi Arabia to cut production but there is a strong motivation to raise output if demand continues to recover.
“We bring our 4Q20 price forecast lower by $2/bbl to $39/bbl to adjust for the deteriorating balance. We opt to keep our 2021 price projections unchanged for now. This is because Tuesday’s US election results will allow a clearer assessment of the path ahead for the largest oil consumer in the world,” reads the JP Morgan report.
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