On August 20th, an OPEC internal report showed that some OPEC oil-producing countries will need to cut an additional 2.31 million barrels per day in production to make up for the recent oversupply.
According to the report, the excess supply from May to July will be compensated in August and September.
OPEC oil-producing countries intensified their joint production cuts to a record 9.7 million barrels per day in May, and this month reduced their output to 7.7 million barrels per day.
In April of this year, the impact of the new crown virus on air and road transportation and other areas of the global economy kept the benchmark oil price below $16 per barrel.
The continued spread of the virus is threatening the prediction of oil demand recovery.
***Additional production cuts from August to September***
The internal report did not say how the additional cuts in August and September will be allocated. However, if the data of 2.31 million barrels per day is used and scored within two months, OPEC will need to increase the scale of production cuts to approximately 8.85 million barrels per day.
The report shows that OPEC expects that oil demand will decrease by 9.1 million barrels per day in 2020, which is 100,000 barrels per day higher than its previous forecast, and will increase by 7 million barrels per day in 2021.
However, OPEC also sees another possibility that a stronger and longer-lasting second wave of epidemics will hit Europe, the United States and India in the second half of this year.
The report shows that under this scenario, demand in 2020 is expected to decrease by 11.2 million barrels per day, increasing the OECD’s commercial oil inventories in the fourth quarter to 233 million barrels, higher than the average level of the last five years.
By 2021, oil inventories will be 250 million barrels higher than the recent 5-year average.
***Production reduction compliance***
The data shows that among OPEC member countries, Iraq and Nigeria are the least obedient. Even the UAE, which voluntarily cut production in June, overproduced about 50,000 barrels per day from May to July.
Among non-OPEC member countries, Russia and Kazakhstan have over 280,000 barrels per day and 190,000 barrels per day respectively.
Source: Chemical Network
