OPEC expects a release of oil stocks by majors consumers to significantly increase a global glut in the next few months, an OPEC source said, just over a week before a meeting to decide immediate output policy.
The outlook might complicate decision-making for the Organization of the Petroleum Exporting Countries and allies, a grouping known as OPEC+, although several sources said there has been no discussion yet on pausing planned production increases.
OPEC’s Economic Commission Board (ECB), a panel of experts that advises ministers, met this week ahead of the OPEC+ ministerial meeting on Dec. 2.
The ECB expects the oil release to swell a surplus in the oil market by 1.1 million barrels per day (bpd), an OPEC source said on condition of anonymity. OPEC has warned in recent days of the expected supply excess in 2021.
It expects a 400,000 bpd surplus in December, expanding to 2.3 million bpd in January and 3.7 million bpd in February if consumer nations go ahead with the release, the source said.
Bloomberg News earlier reported the ECB findings.
On Tuesday, U.S. President Joe Biden’s administration said it would release 50 million barrels of oil from strategic reserves in co-ordination with smaller releases from Britain, China, India, South Korea and Japan, to try to cool prices after OPEC+ ignored calls to pump more.
Biden, facing low approval ratings ahead of next year’s congressional elections, was frustrated after OPEC+ shrugged off his repeated requests to pump more oil. Retail U.S. gasoline prices are up more than 60 per cent in the last year, the fastest rate of increase since 2000.
Goldman Sachs estimated the total size of the release at 70 million-80 million barrels, less than one day’s worth of global consumption, describing it as a “a drop in the ocean.”
OPEC+ has resisted the U.S. calls to do more as it unwinds its production cuts, which will stand at 3.8 million bpd at the end of December.
It has been increasing output targets by 400,000 bpd every month since August, saying those volumes were sufficient because of the expected oil market surplus next year.
Some market analysts, including JP Morgan, have suggested OPEC could pause output increases after the release of stocks by major consumers.
OPEC+ sources told Reuters that the group has not yet started any discussions on pausing a planned output hike in January, and Iraq’s oil minister said on Thursday OPEC+ should stick to its existing plan.
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