BAKU, Azerbaijan, Oct.6
By Leman Zeynalova – Trend:
Increase of OPEC+ volumes to bring oil prices out of their deep backwardation, Trend reports with reference to Rystad Energy.
OPEC+ left policy unchanged at their regular monthly meeting. As part of these pre-existing plans, the group will raise output by 0.4m barrels per day in both October and November, respectively.
“The confirmation that OPEC+ would keep a cap on supply, instead of feeding the market with even more product and bringing it towards a closer equilibrium, drove traders into a buying frenzy for front-month Brent contracts, as the decision guarantees a tight supply picture in November and December. The tight market was not met by any extra supply relief from OPEC+, which adds fuel to the supply-constrained oil price rally, but the spectacular third quarter rally can only be repeated in coming months should unusual circumstances – either climate events or unplanned supply outages – strike again. Otherwise, the steady increase of OPEC+ volumes will gradually bring oil prices out of their deep backwardation,” said the company.
OPEC+ producers will definitely be monitoring how the high prices affect sales, and also how the market balances evolve through the end of the year, so we expect more “action” from OPEC+ at the December meeting, once there are more clear signals on the winter weather risks and associated upside risk to oil demand, according to Rystad Energy.
The UK-based Capital Economics notes that pressure on OPEC+ to return supply to the market more rapidly had been growing ahead of October 4 meeting.
“We think that their refusal to do so means that the market will remain in a deficit in Q4, which suggests that oil prices will remain elevated for at least the remainder of this year. But perhaps the more important question is whether OPEC+ will even be able to meet these less ambitious targets. OPEC managed less than half of its planned increase in production in August (the latest available data), largely due to disruptions to operations in Angola and Nigeria. And if output continues to fall short of the group’s targets, oil prices could remain high into next year as well.”
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