BAKU, Azerbaijan, June 4
By Leman Zeynalova – Trend:
The expectation is for global supply to grow over the coming months primarily as a result of the easing of OPEC+ production cuts, Trend reports with reference to Fitch Solutions.
“The group met in June to reaffirm the plan to gradually repeal the size of output cuts on a monthly basis through to July. The schedule is for 350,000b/d of cuts to be rolled back in June and another 400,000b/d in July, allowing more than 2mn b/d of production to return to market. The progressive increase in rollbacks indicates OPEC+’s conviction that there will be a sufficient market demand to absorb these returning barrels. According to our data, global demand is expected to see annual growth of 6 percent in 2021 following a massive 8.7 percent dip in 2020. As a result of the OPEC production increase, we have revised our forecasts for production cuts to account for further reductions in cuts throughout 2021 and across all of 2022 - beyond expiry of the current deal in April 2022,” reads the latest report released by Fitch Solutions.
For 2022 and 2023, the global supply outlook becomes more clouded, according to the company.
“Supply is set for high growth in both years, reflecting a fuller recovery in US shale, the end of the OPEC+ deal and the rollback of sanctions on Iranian oil exports. Risks are to the downside, as the forecast growth in US shale is dependent on high prices and could very well disappoint. In addition, output recovery in some OPEC+ producers, once the current production cuts are rolled off as per scheduled in April 2022, could prove slower than others, adding less to global supply than currently forecast.
Supply contribution from non-OPEC sources will add to the forecast growth over the coming years led by increases across Norway and to lesser extents, Brazil and Guyana. However, these will be driven by projects that were meant to have come online earlier but were delayed due to Covid-19, in contrast with new exploration bearing fruit. Growth outlooks across Asia’s larger, mature crude producers are noticeably bearish as aging reserves and growing state influence in the sector dissuade some much-needed new upstream investments from private, foreign parties in spite of ‘large’ demand-growth potential,” said Fitch Solutions.
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