OPEC and its allies will follow through on plans to hike crude production through July, ministers announced June 1, as oil prices broke through the $70/b ceiling amid forecasts of a tight market ahead.
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But the alliance kept traders in the dark on output levels beyond that, with ministers unsure of how the market will shape up in two months time.
The continuing COVID-19 pandemic in Asia and the prospect of sanctions relief for Iran have the producer coalition in wait-and-see mode. OPEC will next convene June 24 and then hold an expanded meeting July 1 with Russia and nine other partners in the OPEC+ supply accord to decide on production quotas for August and beyond.
"We have reinstated monthly [OPEC+] meetings again, with a view that we want to give the market assurance and comfort that we will be attentive and monitoring the situation," Saudi energy minister Prince Abdulaziz bin Salman told reporters following the decision.
He added that the Iran nuclear deal talks were still in flux and the issue was not discussed at various OPEC+ deliberations over the past few days.
"The jury is still out," he said of the potential return of Iranian crude to the market. "We know that the situation prevailing as of today allows us to proceed with what we were planning to do in July." But he also shrugged off warnings that the market could overtighten without more OPEC+ supply, or that elevated prices could unleash another wave of US shale production stealing the alliance's customers.
"I'll believe it when I see it," the prince said.
The 23-country OPEC+ alliance, which held almost 7 million b/d of production offline in April, is in the process of boosting output by some 2.1 million b/d from May-July -- roughly 2% of pre-pandemic demand -- of which 1.4 million b/d will come from Saudi Arabia.
Beyond that, the OPEC+ supply accord calls for quotas to be held steady from through April 2022, but ministers have said they reserve the right to change them as market conditions warrant.
Consuming countries are already sounding the alarm on the market potentially overheating, with ICE Brent hitting $71.01/b as of 1515 GMT, a more than two-year high.
The International Energy Agency warned that global oil prices will face further upward pressure unless OPEC+ members release even more crude in the coming months to meet a strong demand rebound.
"Over the next six months, I see very clearly that there is a strong recovery of oil demand in the US, China, Europe and elsewhere and if OPEC+ stick to their current policies we may see a wider gap between supply and demand," IEA executive director Fatih Birol told Bloomberg Television in an interview June 1.
"In the absence of not changing the policies with the strong growth coming...we'll see a widening gap which in turn would put further upward pressure on the prices," he said.
In its latest oil market report last month, the IEA said it sees a major oil demand rebound of some 5.4 million b/d in 2021, and forecast that likely supply growth by the OPEC+ group and others would be "nowhere close" to the expected demand increase.
It cautioned that current production plans by OPEC+ "won't rise fast enough to keep pace with the expected demand recovery," even if a nuclear deal with Iran sees more volumes coming from the OPEC member later this year.
The OPEC secretariat is even more bullish, saying in its most recent monthly oil market report that it expects 6.0 million b/d of demand growth in 2021, with a supply deficit of 1.4 million b/d.
One OPEC delegate, however, said that some countries have voiced concern that the forecast could be too optimistic.
Platts Analytics forecasts robust global oil demand growth of 5.1 million b/d in June and July, with supply still bullishly remaining 1.5 million b/d in deficit.
In his opening remarks to the OPEC+ meeting, Prince Abdulaziz said the oil demand picture had "shown clear signs of improvement," especially in the US and China.
He and Russian Deputy Prime Minister Alexander Novak, who heads his country's OPEC+ delegation, praised the global rollout of coronavirus vaccines, which have now totaled 1.8 billion doses administered around the world.
"This active rollout of the vaccine reduces risks of the new wave and helps us to restore mobility of the global population," Novak said.
Despite the demand rebound, Prince Abdulaziz warned that "there are still clouds on the horizon, and therefore we should continue to consult and closely monitor market fundamentals and be proactive to ensure market stability."
Ole Hansen, head of commodity strategy for Saxo Bank, said OPEC+ will have to tread a fine line between supporting prices and overtightening the market, which could be self-defeating for the oil producer coalition.
"A prolonged period of inaction allowing oil prices to rise further could see inflation, through higher fuel cost, become even more entrenched and prolonged, eventually curbing growth and with that demand for crude oil," he said.