OPEC+ sees lower global oil oversupply as it prepares to set Sep output targets

OPEC and its allies are remaining mum about their intentions when they meet Aug. 3 to decide on September production quotas, but an analysis from the group shows a lower global oil supply surplus than previously estimated.

The surplus was downgraded to 800,000 b/d for 2022 compared with 1 million b/d in the last analysis before the group's June 30 meeting, according to a market report issued by the OPEC secretariat to delegates and seen by S&P Global Commodity Insights.

For 2023, the surplus will be 500,000 b/d, the report stated.

However, the analysis assumes that OPEC+ crude production will grow 500,000 b/d from July to August and remain at that level through the end of the year -- a doubtful proposition given that many members have been struggling for months to hit their output targets.

The report guides OPEC+ deliberations but does not dictate policy.

Key OPEC+ members Saudi Arabia and the UAE have faced ratcheting pressure from key customers, including the US, Japan and France, in recent weeks to increase crude production and help relieve high prices that are contributing to rampant inflation in many economies.

But delegates have said the alliance may choose to leave quotas flat for September to guard against demand slippage from rising COVID-19 rates and the prospects of a recession in the months ahead, though they said no decisions had been made.

"The global market is currently restless and fragile," Iraqi oil minister spokesperson Assem Jihad was quoted as saying July 31 by the official Iraqi News Agency. The alliance would not increase production at the expense of oil market stability, he added.

Saudi Arabia and the UAE hold virtually all of the world's approximately 1.1 million b/d in spare production capacity, according to Platts Analytics, a historically thin level that has typically only been seen during wars and other periods of price spikes.

Primary non-OPEC ally Russia remains a key participant within the OPEC+ alliance and is likely to oppose any significant hike in quotas, as it continues to be in conflict in Ukraine and navigate Western sanctions.

A nine-country ministerial monitoring committee, cochaired by Saudi Arabia and Russia, will meet Aug. 3 at 1 pm Vienna time (1100 GMT), before the full OPEC+ alliance convenes at 1:30 pm.

The meeting will be the first overseen by new OPEC Secretary General Haitham al-Ghais, of Kuwait, who replaced late Mohammed Barkindo on Aug. 1.