Although OPEC+ is widely expected to press ahead with its intended output increase of 400k barrels per day at it's meeting on Wednesday, it remains to be seen how the alliance would address the downside demand risks stemming from the Delta variant, Han Tan, Chief Market Analyst at Exinity Group said.
An OPEC+ supply hike should also help keep key members of the alliance onside, placing a lid on the political dramas that have plagued key meetings in the recent past, he added.
Oil prices should find enough support from continuously tightening global market conditions through year-end. However, any upside in prices may be limited, barring a halt to OPEC+ output hikes, with the group’s own projections reportedly pointing to a return to surplus in 2022.
From a technical perspective, the 50-day simple moving average remains the immediate resistance level for WTI futures, while offering immediate support for Brent, he added.
OPEC+ has revised up its 2022 oil demand forecast ahead of the meeting later today amid pressure from the United States to ramp up production, according to Reuters.
Oil prices were up Wednesday morning. The news agency is reporting that the group's experts now believe demand will reach 4.2million barrels per day (bpd) next year, up from the previous forecast of 3.28 million bpd
OPEC+, which includes Russia, meets on Wednesday evening at 18:00 Saudi Arabian time and is forecast to stick to its planned increase of 400,000 bpd, despite President Biden's administration calling for a greater rise to help to support the global economy.
Despite the increase in production, world stocks of oil are expected to fall at an average rate of 825,000 bpd a day over the next four months.
However, the higher demand forecast strengthens the case for a speedier output increases by OPEC+ as benchmark Brent crude traded above $72 per barrel, close to multi-year highs.
The demand forecast revision came during the OPEC+ joint technical committee (JTC), which on Tuesday presented an updated report on the state of the oil market in 2021-2022.
On Tuesday, OPEC+ sources said the report, which has not been made public, forecast a 0.9 million bpd deficit this year as global demand recovers.
The report had initially forecast a surplus of 2.5 million bpd in 2022 but this was later revised to a smaller surplus of 1.6 million bpd due to stronger demand, the sources said.
As a result, commercial oil inventories in the OECD, a group of mostly developed countries, would remain below their 2015-2019 average until May 2022 rather than the initial forecast for January 2022, the JTC presentation showed, according to the sources.
However, JCB Energy revealed that OPEC crude output rose by 285k b/d m/m in August to 27.24 million b/d, Bloomberg reported. Saudi Arabia led the gains, increasing by 100k b/d to 9.6 million b/d. OPEC is reviving output as planned, but increases are being tempered by production issues in West Africa.
