OPEC and allies established to simplicity oil output cuts, anticipating demand restoration

Bloomberg WTI heads for weekly decline as virus cases increase

Bloomberg WTI heads for weekly decline as virus cases increase

"OPEC raises 2020 demand forecast for its crude by 0.2 million bpd to 23.8 million bpd".

On Tuesday, a technical committee of The Organization of the Petroleum Exporting Countries and its allies will start a two-day meeting, which could could see the group bringing more oil to the market. In the case of Iran, exports fell from 60.519 billion dollars in 2018 to almost 19.233 billion in 2019, a 68 percent decline, the survey noted. Under a Saudi proposal, the so-called OPEC Plus coalition would relax its current curbs by 2 million barrels a day to 7.7 million barrels a day, the delegates said.

OPEC Secretary-General Mohammed Barkindo said: "If we had not acted in such a decisive way, the market would have been in danger of a near-total collapse".

Brent crude has more than doubled since April to $42.28 a barrel thanks to the cuts and an easing of virus lockdowns in many countries.

If OPEC+ proceeds to reduce production curtailments, this should not come as a surprise, that was the plan on the first place and it should have already been priced in.

"While the oil market has undoubtedly made progress ... the large, and in some countries, accelerating number of COVID-19 cases is a disturbing reminder that the pandemic is not under control and the risk to our market outlook is nearly certainly to the downside", the IEA said in its monthly report.

Weekend headlines suggest that the global oil producers are considering stepping back from their output cut accords, now around 9.7 million barrels a day.

This should be good news for India that imports 85 per cent of its oil requirements.

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In the longer-term, OPEC expects demand for its crude to rebound next year, surpassing levels seen before the pandemic, as rival producers struggle to revive output.

Higher prices have prompted some US producers to start drilling again even as the number of operating oil and natural gas rigs hit a record low for a 10th straight week.

"The energy patch is under pressure this morning from both sides of the supply/demand equation today", said Bob Yawger, director of energy futures at Mizuho in NY, noting "Increases in COVID-19 cases has dented the demand side, and (OPEC) appears determined to increase supply". Under the terms of its agreement, the cuts taper from 9.6 million barrels a day now - roughly 10% of global supply - to 7.7 million a day in August.

However, demand has begun to recover as lockdowns has eased around the world.

Brent crude, which is the global benchmark for oil, is down around 30% this year, while US-traded West Texas Intermediate (WTI) fell below zero at one point in April.

The Journal, citing sources, said Saudi Arabia was leading a push within the organisation to increase production.

Demand in big oil importing countries like India and China is important for oil producers as it would determine how much oil the world would guzzle.

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