The OPEC+ coalition has hardened its views on global oil markets this year and the next one as its members struggle to meet production targets.
According to the group's report, the alliance's committee of technical experts has halved this year's supply surplus forecast to 400,000 barrels a day. He changed forecasts for next year from a 900,000 bpd overweight to a 300,000 bpd deficit.
At the same time, the Joint Technical Committee, which is reviewing the markets on behalf of the ministers who are meeting on Monday, also backed the group leader Saudi Arabia's recent statement that they were ready to resolve the growing disunity in global oil markets by cutting supply.
Oil prices have been falling for three months in a row due to concerns that a slowdown in China and monetary tightening in the US could cut fuel demand. It is the longest drop since 2020. Futures traded around $89 a barrel in New York on Wednesday.
Last week, Saudi Energy Minister Prince Abdulaziz bin Salman warned that the lack of liquidity in the futures markets means they fail to adequately reflect fundamentals of supply and demand.
The Prince also mentioned that the Organization of the Petroleum Exporting Countries is ready to cut supplies again. This measure helped during the Covid downturn in 2020 having revived global markets massive production cuts. Since then, many OPEC+ countries have supported his call, which received additional support from the JTC on Wednesday.
However, given high fuel prices and runaway inflation, many analysts expect the 23-member OPEC+ coalition to hold back for now.
U.S. President Joe Biden urged producers to open taps wider back in July. OPEC+'s call was met with a token increase in production of just 100,000 barrels a day. The group explained that it needs to use its limited reserve stocks carefully in case global markets experience further disruptions.
A more optimistic forecast by the committee may provide additional reason to act cautiously.
With the updated data, global markets look significantly tougher than previously expected. According to the report, oil reserves in developed countries will remain below average until the end of this and next year.