There will be a larger-than-expected surplus in the oil market this year as rising energy costs, tighter monetary policy and fears of a recession weigh down demand, revealed OPEC+ in its latest report on global trends.
The extended organisation – which consists of cartel OPEC and its allies including Russia – is set to meet next week on 5 September to discuss policy measures.
Leading producer Saudi Arabia is prepared to cut oil output, and has signalled OPEC+ could ease current pledges to raise to production levels amid volatility in the future market.
At its last meeting, OPEC+ agreed to raise production targets by 100,000 barrels per day for September, having unwound record cuts of about 10m barrels per day it agreed in 2020 to help counter the impact of the pandemic.
However, five sources told news agency Reuters that discussions are yet to begin on production policy beyond September and whether the producer group would cut output.
The cartel has persistently failed to reach its pledged production targets this year, amid global capacity issues and concerns over potential supply gluts.
OPEC+’s report, which was written by the group’s Joint Technical Committee (JTC), argued that oil demand now faces major uncertainties from rising inflation and tightening monetary policy.
These factors are now eating into consumers’ budgets, lowering the prospect of holidays and travel over the coming months.
Oil prices have been extremely volatile in recent weeks across both major benchmarks, and have fallen back below $100 per barrel as gloomy data forecasting recessions across developed economies raises fears of dropping demand this winter.
Under its base case scenario, the JTC sees the oil market in a surplus of 3.1m barrels per day in September, falling to 0.6m barrels per day in October before rising to 1.4m barrels per day in November.