The next monthly, virtual meeting of the members of the OPEC+ is going to take place tomorrow. Unlike in the run up to the previous meetings, the enthusiasm among the analysts about the latest meeting is somewhat subdued, perhaps sensing that the outcome is just a foregone conclusion.
At the end of its last meeting, OPEC+ estimated a
steady growth in demand of crude oil for 2021, reaching 5.88 million bpd; The
OPEC+ joint technical committee (JTC) still maintains the forecast despite the
unexpected rise in Coronavirus infections in two of its major clients – India and
Japan; the situation in Brazil is a serious concern as well.
The task assigned to the JTC is monitoring the
market fundamentals and of course, the compliance by the members in the output
quota given to individual countries. So far, according to Reuters, the
compliance is overwhelmingly positive.
At present, the demand of crude oil has fallen due
to the catastrophic outbreak in India; although, the situation is not that bad
in Japan, there is a strong possibility of lockdowns being extended to more
prefectures in light of rising infections.
Although the Japanese organisers of the Olympics
still hope the current situation will improve by July, the towns, which are
supposed to host certain Olympic events, appear to be harbouring second
thoughts over the moves, due to rising infections.
This is not something that the analysts of the crude
oil markets thought would happen; the demand calculations, in all probability,
must have taken into account a steep growth in demand due to the most important
global, sport event, the Olympics.
Despite these two factors that could potentially
leave a dent on the forecasts made by the OPEC+, it still maintains it got the
figures right, while admitting the pandemic situation in two major buyers is a
cause for concern.
The OPEC+, however, cannot go back on its promise to
increase the production in its latest meeting, because it was compelled to make
the decision, partly due to international pressure.
