OPEC+ anticipates oil supply to exceed demand later this year by nearly two million barrels per day, ahead of an expected meeting tomorrow between ministers from the group’s member states.
The expanded cartel is forecasting weaker oil demand growth, amid rising inflation from soaring crude oil prices, the resurgence of the Omicron variant across China and market disruption caused by Russia’s invasion of Ukraine.
The company, which consists of the Organisation of the Petroleum Exporting Countries (OPEC) and multiple allies including Russia, has downgraded its expectations for world oil demand from 4.15m barrels per day to 3.67m, a 480,000 daily drop on its previous forecasts.
The forecasts were made in an internal report seen by news agency Reuters, which expects supply to exceed demand by 1.9m barrels this year, which is also 600,000 – higher than previous estimates.
It also predicts OECD oil stocks slightly exceeding the 2015-2019 average in the fourth quarter.
The report was prepared ahead of a meeting of the OPEC+ Joint Technical Committee meeting taking place later today.
Despite the drop in demand, OPEC+ is set to agree another small increase in production targets for June, even as Russian sanctions bite into the country’s output.
Under a deal reached in July last year, OPEC+ has been targeting increases of 432,000 bpd every month until the end of September, to unwind its remaining production cuts.
However, the organisation has persistently failed to reach raised production targets this year, with multiple members failing to hit hiked production quotas amid capacity issues and concerns over future supply gluts leaving them exposed.
The OPEC+ meeting later this week follows the European Union proposing a phased oil embargo on Russia, as part of its six package of sanctions following the invasion of Ukraine.
Russia’s own forecasts showed output may fall by as much as 17 per cent in 2022, according to an economy ministry document seen by Reuters.
The document suggests Russian oil output may decline to between 433.8m and 475.3m tonnes – equivalent to between 8.68m and 9.5m barrels per day – in 2022, from 524m tonnes in 2021.