OPEC+'s policies may become less effective over time

Oil&Gas Materials 21 December 2021 13:31 (UTC +04:00)
OPEC+'s policies may become less effective over time

BAKU, Azerbaijan, Dec.21

By Leman Zeynalova – Trend:

OPEC+'s policies may become less effective over time, Trend reports with reference to Fitch Ratings.

“OPEC+ has been the main stabilizing factor in the global oil market since the pandemic started, once Saudi Arabia and Russia reached consensus and ended their short-lived disagreement over production levels. OPEC+’s supply policies have been cautious throughout 2021. The alliance has increased production more slowly than improvements in demand, which contributed to the most recent oil price rally. OPEC+'s policies may become less effective over time as the UAE, Kuwait, Iraq, Russia and other countries are considering increasing production to monetize their large reserves, while demand could be affected by the impending energy transition,” reads the latest report released by Fitch.

The rating agency notes that oil demand may weaken in 1Q22, which is likely to result in the market switching from a deficit to a surplus due to OPEC+'s recent decision to ramp up production in January by 400,000 barrels of oil per day (bpd), alongside the release of strategic oil reserves by the US and other nations.

“The surplus may theoretically average about 700,000 bpd in 1H21, based on the IEA’s expectations and assuming OPEC+ will continue to add 400,000 bpd of supply each month. Despite this, we expect the surplus to be lower as OPEC+ is likely to adjust its supply growth plans as it is likely to aim to avoid large surpluses or deficits when deciding on its future production levels,” the report reads.


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