The OPEC logo in a photo from the Reuters archive.
from Ahmed Ghaddar
LONDON (Reuters) – The Organization of the Petroleum Exporting Countries expects a move by major consumers to withdraw from oil stocks will lead to a significant increase in the global surplus in the next few months, an OPEC source said, about a week before a meeting to decide on production policy.
That could complicate decision-making in the Organization of the Petroleum Exporting Countries and its allies, the cartel known as OPEC+, although several sources said there had been no discussion so far about halting the planned production increases.
The Council of the OPEC Economic Committee, a group of experts that advises ministers, met this week ahead of the OPEC+ ministerial meeting on Dec. 2.
An OPEC source, who asked not to be named, said that the council expects the withdrawal of oil stocks to increase the surplus in the global market by 1.1 million barrels per day. The Organization of the Petroleum Exporting Countries has warned in the past few days of an expected oversupply in 2021.
The source said the council expects a surplus of 400,000 bpd in December, reaching 2.3 million bpd in January and 3.7 million bpd in February if consuming countries go ahead with withdrawals.
And Bloomberg News published earlier the results of the meeting of the Council of the OPEC Economic Committee.
On Tuesday, the United States said it would withdraw 50 million barrels of oil from strategic reserves, in coordination with similar operations in China, India, South Korea, Japan and Britain, in an attempt to calm prices after OPEC+ ignored calls to pump more crude.
Biden, whose popularity is plummeting ahead of next year’s congressional elections, was disappointed after OPEC+ ignored his repeated requests to pump more oil. US retail gasoline prices rose more than 60 percent last year, the fastest rate of increase since 2000.
Goldman Sachs estimated the total volume of withdrawals at about 70 million to 80 million barrels, which is less than the volume of global consumption in a single day, and described this as “a drop in an ocean.”
OPEC + has resisted calls from Washington to do more as it gradually rolls back production cuts that will amount to 3.8 million barrels per day at the end of December.
The organization has worked to increase the target production by 400,000 barrels per day every month since August, saying that these quantities are sufficient due to the surplus expected to be witnessed in the oil market during the next year.
Some market analysts, including JP Morgan, have indicated that OPEC may pause production increases after the drawdown of oil stocks by major consumers.
OPEC + sources told Reuters that the organization had not yet started any discussions about stopping a planned increase in production in January, and Iraq’s oil minister said on Thursday that OPEC + should stick to its current plan.
(Prepared by Suha Jado for the Arabic Bulletin)
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