OPEC+ Plans 1.5 MMBBl/d Production Increase for August

July 16, 2020October 3rd, 2020
Share
Print Friendly, PDF & Email

The cartel’s analysis (linked below) assumes rapid demand recovery 

“As OPEC begins to unwind its historic May output cuts, it risks overestimating the pace of the oil demand recovery and flooding markets with supply before they are ready to absorb it all. Yet it also runs the risk of not cutting enough.”

Forbes, 7/15/2020

Article Summary

  • OPEC+ decided to reduce supply curbs from 9.7 MMBbl/d to 7.7 MMBbl/d starting in August
  • The actual cut next month will be 8.1-8.3 MMBbl/d, from the 9.7 MMBbl/d reference amount, due to compensatory curbs from certain members
  • The cartel’s July market report (link) outlines demand recovery that would support more supply
  • “Almost all of the output hikes will be consumed in domestic markets of the producing countries as the demand is recovering” – Russian Energy Minister Alexander Novak

AEGIS View

OPEC+’s move to increase output in August was widely expected and therefore price remained steady following the decision on July 15. The group’s tapering follows a recovery in demand, but it could be a delicate balance going forward as the cartel tries to manage how much production to bring back over time. OPEC itself currently has nearly 9 MMBbl/d of spare capacity when excluding Iran and Venezuela. Therefore, oil prices are likely to face an uphill battle as demand continues to return if OPEC’s policy is to match demand increases with increases in supply.

We continue to monitor oil, gas, NGLs, and interest rates for hedging opportunities. To learn more and see AEGIS opinion and recommendations, go to AEGIS View publications, or contact [email protected]. Like what you see? Share this article with the button on the bottom right of your desktop. Market questions or comments? Contact us at [email protected]

Access Our Deeper Market Insights

Product Factor Matrix

Proprietary view of priced-in factors driving the market vs. potential bullish and bearish surprises.

Learn More

Trading Recommendations

Clear trading recommendations based on real market opportunities that enable clients to take action.

Learn More

Market Data

A comprehensive suite of the latest curves, spot pricing, settles, and strips to drive confident hedging decisions.

Learn More

Benchmarking and Trade Analytics

Real-time access to analyze your hedging strategy against AEGIS benchmarks and current market activity.

Learn More