The oil market is tightening and will continue to draw down inventories for the rest of the year. This drawdown is largely due to OPEC+ offering less supply than the expected demand growth in the coming months, analysts and industry professionals say.
The OPEC+ group is expected to add 2 million barrels per day (bpd) between August and December. That is if the UAE-vs-all-others standoff on baseline production levels is resolved and a deal is sealed this week. Such a deal now looks unlikely as OPEC+ called off the meeting on Monday morning.
The proposed additional supply of 2 million bpd, in monthly installments of 400,000-bpd production increases, would be considerably less than the oil market would need as demand is bouncing back, according to many analysts.
The world’s biggest independent oil trader, Vitol Group, also believes that the global oil market will continue to tighten regardless of the fact that supply is likely to grow for the rest of 2021.
“I think there’s very little doubt that whatever lessening of the OPEC+ production cutbacks we see…it will be a fraction of the amount needed to meet growing demand in the second half of 2021.