The Organization of the Petroleum Exporting Countries (OPEC) and its allies have pressed oil nations pumping above output targets to cut more in August-September amid fears that oil demand recovery was slow while saying it could reach pre-pandemic levels by the year-end.
A virtual meeting held by the OPEC+ on Wednesday saw a review in compliance and also saw oil cuts levels left unchanged. The organization during the meeting revealed that cuts would deepen this month and the next because of compensation by Iraq, Nigeria, Angola and Kazakhstan for overproduction in the months of May and July.
In a statement by the OPEC+, it was reported that the countries within OPEC+ are said to have overproduced in May-July and would compensate those volumes in August-September but the exact figures were not disclosed.
Saudi Energy Minister, Prince Abdulaziz bin Salman speaking at the meeting said that, based on projections, the fourth quarter of the year will see an improvement in world oil demand.
“Based on the average projections of various institutions, including OPEC, EIA and the IEA, it is estimated that the world will reach about 97% of pre-pandemic oil demand during the fourth quarter which is a big recovery from the huge falls in April and May.”
He further went on to say that past over-production should be cleared in order to put the compensation regime away.
“We should endeavour to put this temporary compensation regime behind us, by clearing all the past over-production by end of September.”
The Russian Energy Minister Alexander Novak, who also joined the meeting from home said that, “It is very important to maintain full conformity.”
OPEC+ has previously eased output cuts levels to 7.7 million barrels per day (bpd) from August versus a record high 9.7 million bpd or 10 percent of global supply between May and July 2020 to balance supply with collapsing demand.
Over the past decades, OPEC alone has traditionally produced well over 30 million bpd of oil but after this year’s cuts its output stood at 20-22 million bpd.
Brent crude is trading near a 5-month high above $45 a barrel and has more than doubled since hitting a 21-year low below $16 in April, helped by the OPEC+ deal.
Many OPEC members say they need high oil revenues to balance their budgets but also want to avoid allowing oil prices to run well above $50 per barrel as it would encourage a resurgence in U.S. shale production.
The virtual meeting on Wednesday only discussed compliance by countries such as Iraq, Nigeria, Angola and Kazakhstan with another meeting scheduled to happen soon.
