BAKU, Azerbaijan, Dec.7
By Leman Zeynalova – Trend:
OPEC+ will start scaling up production from Jan’22, Trend reports with reference to JP Morgan Bank of the US.
“Impatient to open the taps after months of production restraint, OPEC and its allies, led by Russia, have struck a cautious deal to raise output by 500 kbd in January.
This is far below the 2 mbd taper stipulated in the original agreement but a surprising outcome versus consensus expectations of a one-quarter rollover of the current 7.7 mbd cuts advocated by Saudi Arabia ahead of the meeting,” JP Morgan said in its report.
The Bank believes that future output levels will be decided in monthly ministerial meetings, and the monthly production adjustment can be executed in any direction.
“Compensatory cuts for countries that overproduced in previous months had been extended until March 2021. We make changes to our model and now look for OPEC+ to add 500 kbd of production every month through April for a total output increase of 2 mbd now that the alliance has opted to bring more barrels to the market. We previously assumed the tapering would be delayed until April 2021. Our projections see demand normalizing back to pre-virus levels only by 2022, and we maintain our view that OPEC+ will continue to stick with the terms of the original agreement throughout 2021,” reads the report.
This means that 5.7 mbd of production will remain out of the market for the entirety of 2021, according to JP Morgan.
“We believe the end-date of the original agreement could be brought forward by a quarter, and OPEC+ will start scaling up production from Jan’22. As expected, our 1Q21 balance moved from a 200 kbd deficit to a 300 kbd surplus,and the 2Q21 balance dipped into a slightly larger deficit of around 100 kbd. Despite these intra-quarterly tweaks, OPEC+’s more expeditious but less aggressive tapering did not change our annual balance. We still see global oil market in a deficit averaging 1.2 mbd through 2021 and OECD inventories normalizing by late 2021. We keep our price forecasts unchanged,” the report says.
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