OPEC+ Is Likely to Increase Production Soon

July 14, 2020July 28th, 2020
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Saudi Arabia and OPEC+ are considering an August production increase, amid a recovery in demand

Select members of the producer group will meet on Wednesday July 15 to discuss their currently policy aimed at cutting 9.7 MMBbl/d from April, and later extended through July, according to OPEC. Saudi Arabia, the de facto leader of OPEC, has proposed a 2 MMBbl/d increase in production for the group to bring the new amount of reductions to 7.7 MMBbl/d, according to delegates and the Wall Street Journal.

Original OPEC+ 1.2 MMBbl/d cut effective January 1, 2017
OPEC+ agrees to take 1.2 MMBbl/d off the market for the first six months of 2019
Saudi Arabia decides to flood the market with oil after negotiations with other OPEC+ members dissolves. Price war started right as COVID-19 was about to hit the market
OPEC+ agrees to historic cut of nearly 10 MMBbl/d as lower oil demand sent prices plummeting

The OPEC capacity chart (top right) shows current production and available capacity per member, according to Bloomberg estimates. The total available capacity stands at about 9 MMBbl/d if excluding Iran and Venezuela Economics sanctions depressed both country’s output.

Brent crude prices have rallied over 100% to near $42/Bbl since OPEC+ supply quotas were negotiated in April. The historic cuts by OPEC+ have helped reduce the amount of oil headed for storage.  There are now indications that global demand is recovering. Mandatory stay-at-home orders and business restrictions have eased, prompting OPEC+ to discuss bringing some supply back to the market.

We continue to monitor oil, gas, NGLs, and regional markets for hedging opportunities. To learn more and see AEGIS opinion and recommendations, go to AEGIS View publications, or contact info@aegis-energy.com. Like what you see? Share this article with the button on the bottom right of your desktop. Market questions or comments? Contact us at view@aegis-energy.com

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