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Barkindo cites 'fragility' of world economy, as OPEC revises oil demand, supply forecasts

Increase font size  Decrease font size Date:2021-04-02   Views:247
The outlook for the oil market remains hazy, OPEC Secretary General Mohammed Barkindo said March 31, complicating efforts by the bloc and its allies to manage supply.

The OPEC+ coalition will meet April 1 to set production levels for May and perhaps beyond, and a raft of bearish indicators in the market has many members favoring a rollover of current quotas, instead of increasing output. But the length of any extension has yet to be negotiated, and Russia is expected to ask for another slight increase in its quota to accommodate higher domestic fuel demand.
Saudi Arabia must also decide whether to taper its additional voluntary 1 million b/d production cut.

The OPEC secretariat has revised downward its 2021 global oil demand forecast, while increasing its estimate of non-OPEC supply. Global demand is now projected to grow 5.6 million b/d in 2021, down 5% from its forecast of 5.9 million b/d made three weeks ago.

Producers from outside the organization, meanwhile, are expected to grow supply by 1 million b/d, compared to 700,000 b/d previously forecast.

Global oil inventories remain 58 million barrels above the targeted 2015-2019 average, with most of February's draw in stocks comprising oil products, not crude, as the deep freeze in the US caused refineries to temporarily halt operations, the secretariat said.

"We need to remember that the environment remains challenging, complex and uncertain, with the market volatility we have witnessed in the last two weeks of March a reminder of the fragility facing economies and oil demand," Barkindo told a nine-country OPEC+ ministerial monitoring committee that met March 31.

The committee is tasked with reviewing market conditions and issuing recommendations to the full OPEC+ body.

The alliance's current quotas are keeping more than 7.1 million b/d of crude production off the market, with Saudi Arabia adding an extra voluntary 1 million b/d cut on top.

Under the terms of its agreement, the bloc can adjust output caps by up to 500,000 b/d each month.

Barkindo added that most of the demand rebound will occur in the second half of 2021. The downward revision to demand growth was due to the resurgence of COVID-19 cases in Europe, uneven vaccine rollouts and inflationary pressures.

"We should not be out smelling the flowers just yet," Barkindo said.

Platts Analytics is forecasting 5.8 million b/d of demand growth and a 1.2 million b/d increase in non-OPEC supply in 2021.
 
 
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