The OPEC coalition led by Saudi Arabia and Russia is expected to press on with the planned revival of oil production, as prices bounce back from their August downturn.
The coalition is gradually restoring the vast amount of crude production halted during the pandemic, and will probably ratify the next monthly instalment when it gathers on Sept. 1, according to a Bloomberg survey of traders and analysts.
Crude markets faltered earlier this month as the resurgent pandemic threatened demand in China and the U.S. But prices have since recovered after fuel use proved resilient to the latest coronavirus wave, giving the Organization of Petroleum Exporting Countries and its partners more breathing space.
“Uncertainties over the world economy and the growth recovery in China have largely peeled away,” said Ed Morse, head of commodities research at Citigroup Inc. “There’s good evidence that the bottom in oil prices was temporary and overdone, and if the recovery continues, OPEC+ would likely stick to the plan.”
Roughly 45% of the unprecedented production volume shuttered last year has already restarted, according to Bloomberg. Under a plan spearheaded by Saudi Energy Minister Prince Abdulaziz bin Salman, OPEC+ will also return the rest in monthly increments of 400,000 barrels a day through to late 2022.
The OPEC+ coalition has steadily kept prices in the oil market high enough to support the revival of the global petroleum industry, and largely avoided the kind of spike that could threaten the world’s economic recovery, but oil demand seems to be pressuring the cartel.
Earlier this month, its plans for supply increases came into question. International crude prices sank about $11 a barrel — roughly 15% — in the first three weeks of August as China reimposed lockdowns. The International Energy Agency, a prominent forecaster, slashed its demand outlook for the rest of the year and then warned of a renewed surplus in next year.
However, with the stable demand and price balancing, OPEC+ would hopefully maintain its decision of increasing supply.