OPEC+ Poised to Provide Dose of Bullish Medicine

The OPEC+ alliance seems poised to give the oil market “yet another dose of bullish medicine” at tomorrow’s policy meeting, according to Rystad Energy oil markets analyst Louise Dickson.

In a statement sent to Rigzone on Wednesday, Dickson noted that the expectation is that the group will not increase oil output from May onwards and instead wait for the oil demand recovery to gain speed again.

“There is a lot at stake as there are nearly eight million barrels of oil per day, including the voluntary Saudi cuts, that are being put on ice and are waiting to return when OPEC+ allows,” Dickson said in the statement.

“The expectation that OPEC will be conservative in this meeting also comes from its recent communique, as the group downgraded its oil demand growth estimate for 2021 to 5.6 million barrels per day, down from its previous forecast of 5.9 million barrels per day,” Dickson added in the statement.

The Rystad Energy analyst said the “massive” one million barrel per day voluntary cut from Saudi Arabia has kept the oil price “buoyed” since announced in January 2021.

“Saudi is still hanging on to the promise, but these barrels have to return at some point and when that moment comes, prices will not be spared,” Dickson said.

“The Saudi policymakers of course know that if they drop the ball and allow a full flow of their curtailed barrels, prices will be hit severely, and that benefits no one,” Dickson added.

“Saudi Arabia is expected to pursue a gradual return of its voluntarily cut production, but we may not see it yet from May, as oil demand will still be under pressure,” the analyst continued.

Dickson noted in the statement that Rystad Energy expects the oil demand recovery to speed up in the second part of the year “and that’s when we believe OPEC+ will generously open the taps again”.

To contact the author, email andreas.exarheas@rigzone.com