OPEC + expects global oil stocks to rise

Global oil stocks are expected to rise faster than expected, according to an internal report prepared for the OPEC + group technical committee meeting seen by Energy intelligence.

The report, prepared for the Joint Technical Committee (JTC) meeting – expected on Wednesday – shows OPEC + expects global oil supply to exceed demand by 3 million barrels per day (bpd) over the course of of the first quarter of next year, according to the document seen by Energy Intelligence.

The report analyzed oil market conditions before oil prices fell on Friday in response to the Omicron variant, which took Brent Crude down to $ 70 and WTI crude to below $ 70 a barrel.

In the baseline scenario of the OPEC + assessment, oil supply is expected to exceed demand by 1.8 million bpd for the whole of 2022. This assessment includes OPEC + increasing production by 400,000 bpd monthly through September 2022 and the publication of a total of 70 million crude from strategic inventories in the first quarter of 2022, including the 50 million released from the United States Strategic Petroleum Reserve (SPR).

While the implicit global inventory reductions in 2021 are estimated to total 442 million barrels, next year will see an implicit inventory build-up of 639 million barrels, according to the OPEC + estimate seen by Energy Intelligence.

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The oversupply expected to hit the market as early as the first quarter of 2022 is another reason the OPEC + group could use to suspend the monthly addition of 400,000 bpd when it meets on Thursday, December 2 to discuss production levels of January.

The JTC meeting has already been postponed from Monday to Wednesday, December 1 in order to give more time to the group’s technical and monitoring panels and to OPEC + experts to study the potential impact of the Omicron COVID variant on demand for oil.

By Tsvetana Paraskova for OilUSD

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Felix J. Dixon