OPEC+ sees oil market deficit despite weaker demand

OPEC+ expects deep output cuts will keep the global oil market in deficit throughout the year, even though the producer group has revised down 2021 demand growth, a document seen by Reuters shows.

A Joint Technical Committee (JTC) of the alliance, which met on Tuesday, reviewed the demand outlook and countries’ compliance with agreed output cuts. A ministerial panel meets to review the market.

Under a base case scenario, the JTC expects the oil market to be in deficit throughout 2021, peaking at 2 million barrels per day in May.

The document showed the group expected the deficit despite having lowered its forecast for oil demand growth this year to 5.6 million barrels per day (bpd), 300,000 bpd less than OPEC’s most recently released estimate.

As the impact of the pandemic lingers, OPEC has cut its demand forecast repeatedly since last July.

In an alternative scenario that sees demand growth shrinking still further, the JTC sees the market flipping into a surplus in April and December, the document showed.

Following record output cuts by the Organization of the Petroleum Exporting Countries and allies (OPEC+), oil has rallied from historic lows hit last year as the impact of the pandemic on travel destroyed demand.

On Tuesday, benchmark Brent crude hit its highest level in almost a year at nearly $58 a barrel.

The JTC’s base case scenario expects oil demand to recover to 97.9 million bpd in December, some 2 million bpd below pre-pandemic levels.

The JTC meeting and the ministerial meeting on Wednesday are not expected to recommend any adjustments to oil output policy, two OPEC sources said on condition of anonymity.